Demographic Change and R&D-Based Economic Growth: Reconciling Theory and Evidence

Center for European, Governance and Economic Development Research (CEGE) Discussion Paper No. 139 - September 2012

32 Pages Posted: 7 Sep 2012 Last revised: 19 Sep 2012

See all articles by Timo Trimborn

Timo Trimborn

University of Goettingen (Göttingen)

Klaus Prettner

Vienna University of Economics and Business - Department of Economics

Date Written: September 4, 2012

Abstract

In recent decades, most industrialized countries experienced declining population growth rates caused by declining fertility and associated with rising life expectancy. We analyze the effect of continuing demographic change on medium- and long-run economic growth by setting forth an R&D-based growth model including an analytically tractable demographic structure. Our results show that, in response to demographic change, technological progress and economic growth accelerate in the medium run but slow down in the long run. Numerical investigation reveals that the time period during which technological progress and economic growth are faster than without demographic change can be very long. Since the theoretical predictions for the medium run are consistent with the negative association between population growth and economic growth found in the empirical literature, the present framework can reconcile R&D-based growth theory with the available empirical evidence.

Keywords: demographic change, technological progress, economic growth, semi-endogenous growth theory, transitional dynamics

JEL Classification: J11, O30, O41

Suggested Citation

Trimborn, Timo and Prettner, Klaus, Demographic Change and R&D-Based Economic Growth: Reconciling Theory and Evidence (September 4, 2012). Center for European, Governance and Economic Development Research (CEGE) Discussion Paper No. 139 - September 2012, Available at SSRN: https://ssrn.com/abstract=2141191 or http://dx.doi.org/10.2139/ssrn.2141191

Timo Trimborn

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Klaus Prettner (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

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