Growth and Longevity from the Industrial Revolution to the Future of an Aging Society
David De la Croix
Catholic University of Louvain (UCL) - Institut de Recherches Economiques et Sociales (IRES); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)
Uppsala University - Department of Economics
Uppsala University - Institute for Housing and Urban Research
CORE Discussion Paper No. 2006/64
Aging of the population will affect the growth path of all countries. To assess the historical and future importance of this claim we use two popular approaches and evaluate their merits and disadvantages by confronting them to Swedish data. We first simulate an endogenous growth model with human capital linking demographic changes and income growth. Rising longevity increases the incentive to get education, which in turn has ever-lasting effects on growth through a human capital externality. Secondly, we consider a reduced-form statistical model based on the demographic dividend literature. Assuming that there is a common DGP guiding growth through the demographic transition, we use an estimate from post-war global data to backcast the Swedish historical GDP growth. Comparing the two approaches, encompassing tests show that each of them contains independent information on the Swedish growth path, suggesting that there is a benefit from combining them for long-term forecasting.
Number of Pages in PDF File: 34
Keywords: Demographic Transition, Life Expectancy, Education, Income Growth
JEL Classification: J11, O41, I20, N33working papers series
Date posted: September 20, 2006
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