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An analysis of the interdependence of demographic factors, labour effort and economic growth in Ireland

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  • Justin Doran

Abstract

Purpose - The purpose of this paper is to analyse the effects of a declining birth rate and an increasing old age-population ratio on Ireland's economic output. Design/methodology/approach - This paper utilises data on the birth rate, old-age population ratio, economic output and labour effort of the Irish economy to estimate a vector-autoregressive model. The results of this model are then analysed to test for the presence of Granger causality among these variables. In doing so it is possible to assess whether there are statistically significant causal relationships existing among these factors. Subsequently, impulse response functions are derived from this model in order to assess the magnitude of the causal relationships. Findings - The results suggest that declining fertility rates and increases in the old-age dependency ratio have a significant impact on labour effort and economic output. Labour effort is also found to explain variation in the fertility rate and economic output. Economic output is found to effect labour effort and the fertility rate. Social implications - The results derived in this paper raise interesting policy implications. It is evident that Ireland's declining birth rate and increasing old-age population ratio are creating a demographic situation which will have implications for future economic growth. Policies need to be put in place to mitigate the negative effects these factors will have on Irish growth. Originality/value - This paper adopts modern econometric techniques to assess the causal relationships which exist between the demographic and economic factors considered. These have not previously been applied to the Irish situation. In doing this, this paper provides an important insight into the changing dynamics of the Irish economy.

Suggested Citation

  • Justin Doran, 2012. "An analysis of the interdependence of demographic factors, labour effort and economic growth in Ireland," International Journal of Social Economics, Emerald Group Publishing, vol. 39(3), pages 221-237, February.
  • Handle: RePEc:eme:ijsepp:v:39:y:2012:i:3:p:221-237
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    2. Ghosh, Sudeshna, 2017. "South Asian Countries : Economic Growth and Fertility," MPRA Paper 99891, University Library of Munich, Germany.

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    More about this item

    Keywords

    Ireland; Demographics; Economic growth; Birth rate; Granger causality;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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