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Growth vs level effect of population change on economic development: An inspection into human-capital-related mechanisms

Author

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  • Raouf Boucekkine

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

  • Blanca Martínez

    () (Fundamentos del Análisis Económico - UCM - Universidad Complutense de Madrid [Madrid])

  • Ramon Ruiz-Tamarit

    () (Department of Economic Analysis - UV - Universitat de València - Universitat de Valeencia)

Abstract

We study the impact of demographic change on economic short and long-term dynamics in an enlarged Lucas-Uzawa model with intratemporal altruism. Demographics are summarized by population growth rate and initial size. In contrast to the existing literature, the long-run level effects of demographic changes, i.e. their impact on the levels of variables along the balanced growth paths, are deeply characterized in addition to the more standard growth effects. It is shown that the level effect of population growth is a priori ambiguous due to the interaction of three causation mechanisms, a standard one (dilution) and two non-standard, featuring in particular the transmission of demographic shocks into human capital accumulation. Overall, the sign of the level effect of population growth depends on preference and technology parameters, and on the initial conditions as well. In contrast, we prove that the long-run level effect of population size on per capita income is negative while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long-run.

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  • Raouf Boucekkine & Blanca Martínez & Ramon Ruiz-Tamarit, 2011. "Growth vs level effect of population change on economic development: An inspection into human-capital-related mechanisms," Working Papers halshs-00632888, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00632888
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    References listed on IDEAS

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    Cited by:

    1. Alberto BUCCI & Simone MARSIGLIO, 2016. "Financial Development and Economic Growth: Long Run Equilibrium and Transitional Dynamics," Departmental Working Papers 2016-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Gilad Sorek & Bharat Diwakar, 2017. "Weak Scale Effects in Overlapping Generations Economy," Economics Bulletin, AccessEcon, vol. 37(2), pages 962-969.
    3. repec:bla:germec:v:18:y:2017:i:2:p:182-211 is not listed on IDEAS
    4. Gómez, Manuel A., 2014. "Equilibrium dynamics in a class of one-sector endogenous growth models with external habits: An application of special functions," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 50-54.
    5. Marsiglio, Simone, 2014. "Reassessing Edgeworth’s conjecture when population dynamics is stochastic," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 130-140.
    6. Bucci, Alberto, 2013. "Returns to specialization, competition, population, and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2023-2040.
    7. Alberto Bucci, 2015. "Product Proliferation, Population, and Economic Growth," Journal of Human Capital, University of Chicago Press, vol. 9(2), pages 170-197.

    More about this item

    Keywords

    Human Capital; Population Growth; Population Size; Endogenous Growth; Level Effect; Growth Effect;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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