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Demographic structure and capital accumulation: A quantitative assessment

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  • Lau, Sau-Him Paul
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    Abstract

    In a recent paper, d'Albis [2007. Demographic structure and capital accumulation. Journal of Economic Theory 132, 411-434] shows that the effect of population growth on capital accumulation is ambiguous in overlapping-generations models with age-specific mortality rates, contrasting to the predicted negative effect in Diamond [1965. National debt in a neoclassical growth model. American Economic Review 55, 1126-1150] and Blanchard [1985. Debt, deficits, and finite horizons. Journal of Political Economy 93, 223-247]. The quantitative exercises of this paper indicate that while in principle a positive relation between population growth and capital accumulation is possible, this relation is practically always negative for industrial countries. Intuition based on capital dilution and aggregate saving effects is provided. This paper also complements d'Albis [2007. Demographic structure and capital accumulation. Journal of Economic Theory 132, 411-434] in characterizing the steady-state equilibrium in more familiar economic concepts.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 33 (2009)
    Issue (Month): 3 (March)
    Pages: 554-567

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    Handle: RePEc:eee:dyncon:v:33:y:2009:i:3:p:554-567

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    Web page: http://www.elsevier.com/locate/jedc

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    Keywords: Age-specific mortality rates Overlapping generations Population growth Capital accumulation;

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    1. An, Chong-Bum & Jeon, Seung-Hoon, 2006. "Demographic change and economic growth: An inverted-U shape relationship," Economics Letters, Elsevier, vol. 92(3), pages 447-454, September.
    2. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(1), pages 92-114, January.
    3. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
    4. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 195-232.
    5. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
    6. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-15, March.
    7. Andrew B. Abel, 2002. "The effects of a baby boom on stock prices and capital accumulation in the presence of Social Security," Working Papers 03-2, Federal Reserve Bank of Philadelphia.
    8. Antoine Bommier & Ronald D. Lee, 2003. "Overlapping generations models with realistic demography," Journal of Population Economics, Springer, vol. 16(1), pages 135-160, 02.
    9. Kelley, Allen C. & Schmidt, Robert M., 1995. "Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change," Working Papers, Duke University, Department of Economics 95-37, Duke University, Department of Economics.
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    Cited by:
    1. Bruce, Neil & Turnovsky, Stephen J., 2013. "Social security, growth, and welfare in overlapping generations economies with or without annuities," Journal of Public Economics, Elsevier, vol. 101(C), pages 12-24.
    2. Hippolyte D'Albis & Emmanuelle Augeraud-Véron, 2011. "Continuous-Time Overlapping Generations Models," Post-Print hal-00424799, HAL.
    3. Javier Olivera, 2013. "Old-age Support and Demographic Transition in Developing Countries. A Cultural Transmission Model," Working Papers, Geary Institute, University College Dublin 201307, Geary Institute, University College Dublin.
    4. Jochen Mierau & Stephen Turnovsky, 2014. "Capital accumulation and the sources of demographic change," Journal of Population Economics, Springer, vol. 27(3), pages 857-894, July.
    5. Gan, Zhuojiong & Lau, Sau-Him Paul, 2010. "Demographic structure and overlapping generations: A simpler proof with more general conditions," Journal of Mathematical Economics, Elsevier, vol. 46(3), pages 311-319, May.
    6. Lau, Sau-Him Paul, 2014. "Fertility and mortality changes in an overlapping-generations model with realistic demography," Economic Modelling, Elsevier, vol. 38(C), pages 512-521.
    7. Miguel Sánchez-Romero, 2013. "The role of demography on per capita output growth and saving rates," Journal of Population Economics, Springer, vol. 26(4), pages 1347-1377, October.
    8. Feigenbaum, James & Gahramanov, Emin & Tang, Xueli, 2013. "Is it really good to annuitize?," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 116-140.
    9. Miguel Sánchez-Romero & Concepció Patxot & Elisenda Rentería & Guadalupe Souto, 2013. "On the effects of public and private transfers on capital accumulation: some lessons from the NTA aggregates," Journal of Population Economics, Springer, vol. 26(4), pages 1409-1430, October.
    10. Turnovsky, Stephen J., 2011. "On the role of small models in macrodynamics," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(9), pages 1605-1613, September.

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