Population Growth, Age Structure, and Age-Specific Productivity

Motivated by empirical evidence that fluctuations in age structure affect relative wages across age groups, this paper asks whether there is a steady-state age distribution that maximizes the lifetime wages of a representative worker. The paper proves the surprising result that in a pure labor economy with any constant returns technology, a uniform age distribution minimizes lifetime wages. Skewed age distributions, generated by either positive or negative population growth rates, generate unambiguously higher lifetime wages than a stationary population, in spite of possible reductions in per capita output in every period. The presence of non-labor factors complicates, but does not necessarily reverse, this result. The paper relates the beneficial effects of higher rates of population growth on lifetime wages in the pure labor economy with imperfect substitutability across age groups to the benefits of population growth that appear in overlapping-generationn consumption loan models with intergenerational transfers.