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Demographic Changes and the Labor Income Share


Time:4:00pm - 5:30pm, Nov. 1st, 2019

Venue:Room 359S, Overseas Exchange Center, Peking University

Speaker:Hippolyte d'Albis

(Paris School of Economics) 



We study the impact of demographic changes on the inequality between capital and labor. More precisely, we analyze the impact of exogenous changes in both the rate of natural increase and the net migration rate on the labor income as a share of total income. We estimate a structural vector autoregression (VAR) model on a panel of 18 OECD countries with annual data for 1985-2015. We obtain that the response of the labor income share to an exogenous change in the rate of natural increase is significantly negative a few years after the shock whereas its response to an exogenous change in the net migration rate is significantly positive. This suggests that inequality between capital and labor is reduced by international migration while fostered by the natural increase. We rationalize these findings in an original representative agent model where the rate of natural increase and the net migration rate are both modeled. The theoretical model reproduces the empirical findings and highlight the crucial roles of both the elasticity of substitution between capital and labor and the participation rate of migrants to the labor market. The model is then used to evaluate the dynamics consequences of permanent demographic changes and, most notably, reveals that in the long run, the labor income share is likely to fall with both the natural increase and the net migration.




Hippolyte d’Albis is senior researcher at CNRS and professor at the Paris School of Economics. He is specialized in demographic economics, and more precisely, in population ageing, generational economics and migration. His recent publications propose some evaluations of the economic and fiscal consequences of migration flows in host countries. Hippolyte d’Albis is the director of the French National Transfers Accounts team and serves as an associate editor at the Journal of the Economics of Ageingthe Journal of Demographic Economics, and Public Finance Review. He has completed his Ph.D. studies in Economics at the University of Paris I in 2003 and then has been recruited as an Assistant Professor at the University of Toulouse I, and as a Professor at the University of Montpellier III and at the University of Paris I. Between 2015 and 2017, he was deputy director for science at the National Institute for Social Sciences and Humanities of the National Centre for Scientific Research.