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Demographic Change and R&D-based Economic Growth: Reconciling Theory and Evidence

Listed author(s):
  • Klaus Prettner
  • Timo Trimborn

We analyze the effects of demographic change on medium- and long-run economic growth by setting forth an R&D-based growth model including an endogenous demographic structure. The model framework is consistent with the experience of industrialized countries, where declines in mortality are associated with even faster declines in fertility such that population growth slows down. We show that, in response to demographic change, technological progress and economic growth accelerate in the medium run but slow down in the long run. Numerical investigation reveals that the time period during which technological progress and economic growth are faster than without demographic change can be very long. Since the theoretical predictions for the medium run are consistent with the negative association between population growth and economic growth found in the empirical literature, the present framework can reconcile R&D-based growth theory with the available evidence.

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File URL: http://degit.sam.sdu.dk/papers/degit_17/C017_006.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c017_006.

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Length: 27 pages
Date of creation: Sep 2012
Handle: RePEc:deg:conpap:c017_006
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  1. Klaus Prettner, 2013. "Population aging and endogenous economic growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(2), pages 811-834, April.
  2. David E. Bloom & David Canning & Günther Fink, 2010. "Implications of population ageing for economic growth," Oxford Review of Economic Policy, Oxford University Press, vol. 26(4), pages 583-612, Winter.
  3. Prettner, Klaus & Bloom, David E. & Strulik, Holger, 2013. "Declining fertility and economic well-being: Do education and health ride to the rescue?," Labour Economics, Elsevier, vol. 22(C), pages 70-79.
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  8. David de la Croix & Matthias Doepke, 2003. "Inequality and Growth: Why Differential Fertility Matters," American Economic Review, American Economic Association, vol. 93(4), pages 1091-1113, September.
  9. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2010. "R&D-Based Growth in the Post-Modern Era," Working Papers 1009, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  10. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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  19. Allen Kelley & Robert Schmidt, 1995. "Aggregate population and economic growth correlations: The role of the components of demographic change," Demography, Springer;Population Association of America (PAA), vol. 32(4), pages 543-555, November.
  20. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. "Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, vol. 6(3), pages 187-203, September.
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  22. 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.
  23. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
  24. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
  25. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D-based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, 02.
  26. Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030, April.
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