Demographic dynamics and sustainability: insights from an integrated, multi-country simulation model

We develop a simulation model to assess sustainable development on three levels: economic (by determining production, consumption, investment, direct foreign investment, technology transfer, and international trade), social (by calculating population change, migration flows, and welfare), and environmental (by computing the difference between pollution and remediation). The model follows “representative” countries that differ in their initial endowments (i.e., natural resource endowment, physical and human capital, technology, and population), and thus in their development levels and prospects. In a world with movement of goods, people, and capital, free substitution in production, flexible economic structures, and the ability to upgrade input factors via investment, we find that, rather than the physical capacity of the earth being responsible for unsustainable paths, the initial disparities in circumstances among countries and the complex of internal and international human interrelationships can lead to a “social non sustainability” or continued divergence of outcomes. In our model history matters (the exogenous history implied by different starting conditions as well as the endogenous history that evolves over the simulations) in the ultimate prospects of countries and how they respond to institutions (e.g., free trade). Many of the most important country-specific starting points relate to population: human capital and population size, structure, and rates of change.