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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;

    References

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    1. Robert J. Barro & N. Gregory Mankiw & Xavier Sala-i-Martin, 1995. "Capital Mobility in Neoclassical Models of Growth," NBER Working Papers 4206, National Bureau of Economic Research, Inc.
    2. 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.
    3. Kelley, Allen C. & Schmidt, Robert M., 1995. "Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change," Working Papers 95-37, Duke University, Department of Economics.
    4. Andrew B. Abel, 2003. "The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security," Econometrica, Econometric Society, vol. 71(2), pages 551-578, March.
    5. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    6. Antoine Bommier & Ronald D. Lee, 2003. "Overlapping generations models with realistic demography," Journal of Population Economics, Springer, vol. 16(1), pages 135-160, 02.
    7. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
    8. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
    9. 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, vol. 21(2-3), pages 195-232.
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    Cited by:
    1. Hippolyte D'Albis & Emmanuelle Augeraud-Véron, 2011. "Continuous-Time Overlapping Generations Models," Post-Print hal-00424799, HAL.
    2. 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.
    3. Turnovsky, Stephen J., 2011. "On the role of small models in macrodynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1605-1613, September.

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