Towards an Age-Structured Demo-Economic Theory of Population Policy

Gustav Feichtinger, Vienna University of Technology
Alexia Fuernkranz-Prskawetz, Max Planck Institute for Demographic Research
Vladimir Veliov, Vienna University of Technology

This paper brings both intertemporal and age-dependent features to a theory of population policy at the macro-level. A Lotka-type renewal model of population dynamics is combined with a Solow/Ramsey economy. The model we present is closely related to the early contribution by Arthur and McNicoll (1977). In particular we extend their framework by (a) considering age-dependent fertility and savings controls, (b) an age dependent earnings profile and (c) age-specific migration as an additional control variable. By using a new maximum principle for distributed parameter control (in contrast to integral-equations control theory as utilized by Arthur and McNicoll for age-independent controls) we derive meaningful qualitative results for the optimal fertility paths and savings rates. In particular, we analyze numerically how the optimal fertility policy and savings rates depend on the age-structure of population and capital.