Aggregate Population and Economic Growth Correlations: The Role of the Components of Demographic Change

Abstract

The results of recent correlations showing a negative impact of population growth on economic development in cross-country data for the 1980s, versus "nonsignificant" correlations widely found for the 1960s and 1970s, are examined with contemporaneous and lagged components of demographic change, convergence-type economic modeling, and several statistical frameworks. The separate impacts of births and deaths are found to be notable but offsetting in the earlier periods. In contrast, the short-run costs (benefits) of births (mortality reduction) increase (decrease) significantly in the 1980s, and the favorable labor-force impacts of past births are not fully offsetting.

Population Aging and Economic Growth in Asia

“…Thus, the increasing old-age shares we observe throughout Asia will have a negative effect on economic growth in the short run, but in the long run it does not appear that the rising old-age shares will impede economic performance. The positive impact of a decline in youth-age shares and the neutrality of the old-age shares on economic growth are consistent with the fi ndings of Kelley and Schmidt (2005).…”

“…Estimates indicate that as much as one-third of its "economic miracle" can be attributed to a demographic dividend (Bloom and Williamson 1998;Bloom, Canning, and Malaney 2000;Bloom, Canning, and Sevilla 2001;Bloom, Craig, and Malaney 2001;Bloom, Canning, and Sevilla 2003). Another set, due to Kelley and Schmidt (2005) indicates that demographic change accounts for 44 percent of income per capita growth from 1960 to 1990. The fi rst demographic dividend comes about as an accounting effect of a decline in fertility and the resultant rise in the working-age share.…”

“…We would therefore expect changing age structure to be a possible explanation for this increase in aggregate saving. Studies that examine the link between demographic structure and national savings rates do fi nd a strong connection (Leff 1969;Fry and Mason 1982;Mason 1987;Mason 1988;Kelley and Schmidt 1995;Kelley and Schmidt 1996;Higgins and Williamson 1997;Higgins 1998) and suggest that a large part of the savings boom in East Asia can be explained by the changing age structure of the population.…”

The long-run impact of human capital on innovation and economic development in the regions of Europe

“…In this way, it may foster innovations and economic development in the long run. For this reason, population density has been a significant explanatory variable in empirical growth regressions in cross-country settings (e.g., Kelley and Schmidt 1995) and in some European countries (e.g., Ciccone 2002). Finally, its importance for technological progress and ultimately growth has been underlined in long-run growth models (e.g., Galor and Weil 2000).…”

Dynamical analysis of the R&D-based growth model with a regime switch

“…This conclusion is the opposite of the findings of semi-endogenous growth models with labor R&D inputs. However, this is a desirable property of the model in this study, because some empirical studies, such as Kelley (1988), Kelley and Schmidt (1995), and Ahituv (2001), report a negative correlation between population growth and economic growth. A rough sketch of this mechanism is given as follows.…”