Klaus Prettner

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The individual Euler equation: The current value Hamiltonian is H = log(c) + γ log(β) + λ [(r + µ − δ)k + ˆ w − (1 + ψβ)c]. The first order conditions are 1 c = λ(1 + ψβ) (A.1) γ β = λψc (A.2) ˙ λ = (ρ + δ − r)λ. (A.3) From equation (A.2) the birth rate follows as β = γ (1 − γ)ψ. (A.4) Taking the time derivative of equation (A.1) and plugging it into(More)
It is widely argued that declining fertility slows the pace of economic growth in industrialized countries through its negative effect on labor supply. There are, however, theoretical arguments suggesting that the effect of falling fertility on effective labor supply can be offset by associated behavioral changes. We formalize these arguments by setting(More)
We study the effects of labor intensive health care within a research and development (R&D) driven growth model with overlapping generations. Health care increases longevity, labor participation, and productivity, while it also diverts labor away from production and R&D. We examine under which conditions expanding health care enhances growth and welfare and(More)
In recent decades, most industrialized countries experienced declining population growth rates caused by declining fertility and associated with rising life expectancy. We analyze the effect of continuing demographic change on medium-and long-run economic growth by setting forth an R&D-based growth model including an analytically tractable demographic(More)
This article investigates common economic consequences of population aging and economic integration for agglomeration processes. We introduce demography into the New Economic Geography by generalizing the constructed capital approach to account for changes in the age structure of the population. Interestingly, the level of trade costs triggering(More)
This article introduces a social planner version of a model central to the New Economic Geography for explicitly answering whether the symmetric equilibrium outcome of the decentralized market economy is socially desirable. We find that savings incentives are too weak, resulting in an inefficiently low capital stock and therefore an inadequate number of(More)