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Long-run growth and demographic prospects in advanced economies

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  • Galo Nuño

    ()
    (European Central Bank)

  • Cristina Pulido

    ()
    (Banco de España)

  • Rubén Segura-Cayuela

    ()
    (Bank Of America Merril Lynch)

Abstract

This paper analyses the long-run growth rates of advanced economies, based on demographic factors. To this end, growth is broken down into two components: growth in productivity (GDP per working-age person) and the projected rate of growth of the working-age population. Productivity is assumed to grow in the long-run at a constant rate equal to that of the technology leader, whereas the demographic projections are those of the United Nations. This simple methodology abstracts from other factors normally considered in the literature on long-term growth, such as the convergence process (we focus on advanced economies) and heterogeneity in participation and employment rates. However, the results do not differ much from those obtained using these other approaches (which are richer, but also more speculative), although the growth rates turn out to be somewhat lower in most cases. They indicate a general deceleration of growth in advanced economies in the coming two decades, due to a slowdown in working-age population growth. Japan, Germany, Italy and Spain face the least favourable growth dynamics in our sample, as these countries face reductions in the size of their workforces. By 2050 France and the United Kingdom could have overtaken Germany to become the largest economies in Europe. In the case of Spain (whose working-age population is expected to peak in 2024) the growth rate of GDP will progressively decline to just below 2% over the following decade.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/12/Fich/do1206e.pdf
File Function: First version, July 2012
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Occasional Papers with number 1206.

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Length: 30 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:bde:opaper:1206

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Keywords: Advanced economies; demography; convergence; endogenous growth.;

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  1. Sarai Criado & Adrian van Rixtel, 2008. "Structured finance and the financial turmoil of 2007-2008: and introductory overview," Banco de Espa�a Occasional Papers 0808, Banco de Espa�a.
  2. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  3. Howitt, Peter & Mayer-Foulkes, David, 2005. "R&D, Implementation, and Stagnation: A Schumpeterian Theory of Convergence Clubs," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 37(1), pages 147-77, February.
  4. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  5. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  6. Rossana Merola & Douglas Sutherland, 2012. "Fiscal Consolidation: Part 3. Long-Run Projections and Fiscal Gap Calculations," OECD Economics Department Working Papers 934, OECD Publishing.
  7. Duval, Romain & de la Maisonneuve, Christine, 2010. "Long-run growth scenarios for the world economy," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(1), pages 64-80, January.
  8. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S71-102, October.
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