Schooling and cohort size effects: A general equilibrium analysis

In this paper I investigate the impact of changes in the population growth rate on the pattern of employment and wages across age and schooling groups. I use an overlapping generation model where population growth is stochastic and heterogeneous individuals choose how much schooling to get. For a two period lived agent model I carry out two experiments. First I examine how different population growth rates affect the steady state, and second I look at the response of the model to a baby boom. Next I calibrate a version of the model with longer lived agents to the U.S. economy. For reasonable parameter values I find that changes in the age distribution of the population have large effects on schooling, where individuals born in a big cohort invest more in schooling. In the model economy the correlation between the young to old employment ratio and the high school to college employment ratio is $-$0.75, which is 90% of the correlation that we find in the U.S. data.