Labor productivity, labor supply of the old, and economic growth

This study develops an overlapping generations model with human capital accumulation and endogenous labor supply of the old to examine the effects of an old agent's labor productivity on labor supply, educational investments, and economic growth. We present a unique existence of the balanced-growth-path (BGP) equilibrium and find that a rise in an old agent's labor productivity induces more labor supply of the old. Moreover, the growth rate at the BGP equilibrium is hump-shaped in an old agent's labor productivity. As an old agent's labor productivity grows, this growth rate first increases then decreases, which implies that there is no clear negative relationship between an old agent's labor productivity and economic growth.