Open Access

Christian Geppert

• Demographic change belongs to the mega-trends of the 20th and the 21st century. The ongoing aging process in major industrialized countries gives rise to the relative scarcity of raw labor and the relative abundance of physical capital. Standard macroeconomic models suggest that this depresses asset returns and increases wages which, in turn, provides incentives for more human capital accumulation. This thesis quantifies the macroeconomic effects of demographic change and reveals the importance of human capital adjustments for price and welfare effects within and across generations. Chapter 1 investigates the distributions of income, skills, and welfare in the German economy along the inter- and the intra-generational dimension. It shows that demographic change leads to a more capital- and skill-intensive economy and that high-school households loose compared to college households in terms of welfare. Chapter 2 disentangles the effect of demographic change on returns to risk-free and risky assets in the U.S. and measures the net effect on the equity premium. It shows that both returns decline while the equity premium increases slightly. Endogenous human capital adjustments are crucial for relatively small effects. Chapter 3 develops a method for computing transitional dynamics in heterogeneous agent models with aggregate risk if these transitions are induced by exogenous deterministic dynamics such as demographic change. The application of the method to a simple illustrative example shows a large reduction in total computing time while approximation errors are small.