Possible Paths for GDP Per Capita – Simulation with a Demographic Growth Model

Abstract

To begin our paper, we point out the importance of demographic growth models by highlighting the conceptual framework of overlapping generations. We define the formulas in our own model based on Lee -Mason (2010) Journal of Economic Literature (JEL) codes: E23, J11, O40Keywords: overlapping generations model, total fertility rate, survival rate, simulation path, GDP per capita IntroductionThe exploration of the regularities in economic growth and the projection of potential future paths has excited economists since the emergence of economic thinking.1 Nevertheless, the significance of population numbers and structures * The views expressed in this paper are those of the author(s) and do not necessarily reflect the offical view of the Magyar Nemzeti Bank. Éva Berde is a professor at the Corvinus University of Budapest. E-mail: eva.berde@uni-corvinus.hu Izabella Kuncz is an assistant lecturer at the Corvinus University of Budapest. E-mail: izabella.kuncz@uni-corvinus.huThe study was financed by the Pallas Athena Domus Animae Foundation. The views expressed in this article are solely those of the authors.The Hungarian manuscript was received on 26 June 2017.DOI: http://doi.org/10.25201/FER.16.4.36571 The first such efforts that can be cited appeared with the representatives of the classical school of economics. Smith (1776) not only presented the benefits of the division of labour, but also mentioned that the productivity growth that can be achieved through the division of labour increases economic prosperity, and facilitates the future development of the economy. Review, Vol. 16 Issue 4., December 2017, pp. 36-57. Financial and Economic 37Possible Paths for GDP Per Capita only started to be taken into account in growth models much later.2 From the second half of the 1980s, as humanity entered the fourth stage of demographic transition, demographics determined economic developments to such an extent that demographic variables could no longer be left out of growth models.In the fourth stage of demographic transition, 3 the mortality rate steadily declines in almost all developed countries of the world, and in parallel with this, the total fertility rate (TFR) is even lower than earlier. The total fertility rate has dropped to below the replacement level several times, which portends serious problems for the future. Fulfilling the needs of the ageing population, and, more generally, maintaining the operation of the economy may prove to be highly difficult under such circumstances. While the total fertility rate of more developed regions drops, huge net population growth characterises certain less developed areas, due to a diminishing mortality rate combined with a high fertility rate, which, however, is still lower than earlier. In these countries, the future decrease in the total fertility rate and the further drop in the mortality rate are expected, and therefore it is likely that the share of the working-age population will soar temporarily. These trends may provide an economic stimulus to the countries concerned...

Hatvanhat éves a Solow-Swan modell = The Solow-Swan model just turned 66

“…Bloom et al [2010] empirikus tanulmányában rámutat, hogy az OECD országokban az elöregedés negatív hatással lehet a gazdasági növekedésre, a negatív hatások jelentős részét azonban ellensúlyozzák a különböző viselkedési válaszok (például a nők nagyobb aktivitása) és a reformok (például a nyugdíjkorhatár megemelése), így a negatív hatás végeredményben igen csekély. Szintén az elöregedéssel foglalkozik Berde-Kuncz [2017], és mutatnak rá, hogy annak lehet hatása a GDP pályájára.…”

Economic Determinants of the Natural Fertility Rate with Special Focus on the EU and on Hungary

“…Another important question is whether there is any relation between the level of economic development and the fertility rate. Although GDP and SNA indicators are frequently criticised in economic analyses, in most cases, demographic trends are compared to GDP or an indicator derived from it (Berde and Kuncz, 2017). In an economic historical perspective, there is a definitely adverse correlation between income levels and fertility; and specific fertility-related theories have emerged to explain this phenomenon, but they have been unable to give a satisfactory answer (Jones and Schoonbroodt, 2010).…”