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...