Gerontocracy in Motion?
29
been -0.06 (marginal effect for complete sample5). Indeed, the educational
structure of one’s own cohort has a significant and positive impact on employ-
ment probabilities. A 1 % increase in the share of highly educated individuals
in one’s own cohort increases the individual probability to be regularly em-
ployed by slightly more than 0.002 percentage points, all other things equal.
This positive effect indicates that a change in the population age structure pro-
vides a motive for further human capital accumulation. This behavioral re-
sponse then impinges upon individual employment probabilities.
5. Policy Options
Changes in the population age structure have the potential to affect the eco-
nomic prosperity of individuals considerably. Measured over the complete life
cycle, members of large cohorts apparently tend to experience lower wages
and incomes, and lower employment rates than small cohorts under otherwise
identical circumstances. The available evidence suggests that small cohorts
even tend to invest relatively intensively into human capital, and that the pro-
ductivity of small cohorts might be lifted further by disproportionate comple-
mentary accumulation of physical capital. Viewed from this perspective, the
secular trend to a significantly older, and shrinking society seems to entail seri-
ous advantages for subsequent generations.
Yet, this prediction is far from conveying the complete picture. A first reason
of uncertainty lies in the nature and extent of technological progress. Through-
out the modern era, subsequent generations have tended to experience con-
siderably higher economic prosperity during their life times than their prede-
cessors, as a consequence of the fast and steady accumulation of human
knowledge. While this tendency has slowed down in recent decades, in lifetime
perspective its effects benefit the baby boom generation of the 1960s in com-
parison to the smaller post-WWII generation. The nature of technological
progress does not need to be neutral, though (Acemoglu 2002). It is conceiv-
able that many technological and organizational advances throughout the
next decades might enhance the productivity of the large baby boom genera-
tion disproportionately, which is by then a generation of older workers.
Thus, the market itself might mitigate the disadvantages of generational
crowding. A related phenomenon concerns questions of political economy.
Particularly in the corporatist economies of continental Europe, we might ex-
pect large cohorts to experience relatively favorable outcomes, since they can
influence the working of the market to their advantage. Our own empirical ap-
plication provided evidence on employment rates which are consistent with
5 Full results for the specification without cohort structure are available from the authors upon
request.