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Demography and Growth: A Unified Treatment of Overlapping Generations

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  • Neil Bruce
  • Stephen J. Turnovsky

Abstract

We construct a unified overlapping-generations (OLG) framework of equilibrium growth that includes the Blanchard �perpetual youth� model, the Samuelson model, and the infinitely-lived representative agent growth model as limit specifications of a �realistic�, two-parameter survivorship function. We analyze how demographic conditions affect the equilibrium growth and savings rates in an economy by computing equilibrium rates under different specifications of the survivorship function. Differences in population growth rates, life-expectancies, retirement durations, and the degree of concavity of the survivorship function are found to have significant impacts on equilibrium growth rates. The observed effects are consistent with some cross-country correlations between demographic conditions and growth rates. We also identify a potential �Malthusian growth trap� in economies where life expectancy is short, fertility rates are high, and households work most of their lives�conditions often found in less developed economies.

Suggested Citation

  • Neil Bruce & Stephen J. Turnovsky, 2009. "Demography and Growth: A Unified Treatment of Overlapping Generations," Working Papers UWEC-2009-21-R, University of Washington, Department of Economics, revised Jun 2011.
    • Handle: RePEc:udb:wpaper:uwec-2009-21-r
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    References listed on IDEAS

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    1. Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
    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. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June.
    4. Antoine Bommier & Ronald D. Lee, 2003. "Overlapping generations models with realistic demography," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 135-160, February.
    5. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    6. Burke, Jonathan L., 1996. "Equilibrium for Overlapping Generations in Continuous Time," Journal of Economic Theory, Elsevier, vol. 70(2), pages 364-390, August.
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    Cited by:

    1. Wong, Chi Heem & Tsui, Albert K., 2015. "Forecasting life expectancy: Evidence from a new survival function," Insurance: Mathematics and Economics, Elsevier, vol. 65(C), pages 208-226.
    2. Holger Strulik & Sebastian Vollmer, 2013. "Long-run trends of human aging and longevity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1303-1323, October.
    3. Wong, Chi Heem & Tsui, Albert K, 2015. "Forecasting Life Expectancy: Evidence from a New Survival Function," CEI Working Paper Series 2015-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    4. Jochen Mierau & Stephen Turnovsky, 2014. "Demography, growth, and inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 29-68, January.
    5. Bucci, Alberto & Carbonari, Lorenzo & Trovato, Giovanni, 2021. "Variety, Competition, And Population In Economic Growth: Theory And Empirics," Macroeconomic Dynamics, Cambridge University Press, vol. 25(5), pages 1303-1330, July.
    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.

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