Automation, education, and population: Dynamic effects in an OLG growth and fertility model

We address two main structural changes occurring in developed countries: the rise of automation and population ageing. Using an R&D-based growth model under an OLG framework, we consider education and fertility decisions, as well as automation in the production process, to explore the interplay between population ageing and automation. The results reveal dynamics that align with the US trends from 1970 to 2021. In particular, in response to increasing real wages, the model captures a decline in the fertility rate for low-skilled workers but an increase for high-skilled workers, consistent with observed data. We also analyze the model’s response to shocks related to automation and demographics (fertility vs. longevity), as well as policy instruments designed to reduce inequality.