Demography and Growth: A Unified Treatment of Overlapping Generations
We construct a unified overlapping-generations (OLG) framework of equilibrium growth that includes the Blanchard ï¿½perpetual youthï¿½ model, the Samuelson model, and the infinitely-lived representative agent growth model as limit specifications of a ï¿½realisticï¿½, 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 ï¿½Malthusian growth trapï¿½ in economies where life expectancy is short, fertility rates are high, and households work most of their livesï¿½conditions often found in less developed economies.
|Date of creation:||Apr 2009|
|Date of revision:||Jun 2011|
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