Data Economy to the Rescue of Our Empty Planet?

Abstract

Many medium-and high-income countries are riddled with aging and declining populations. Against the backdrop of the rapid emergence of big data, digitization, and AI, we explore how the development of the data economy interacts with these demographic challenges and has the potential to mitigate or even reverse these ominous trends. Specifically, we construct an endogenous growth model with endogenous fertility, incorporating data into the accumulation of human capital. We identify a significant reinforcement mechanism: a larger population generates more data, which, due to its nonrival nature, accelerates human capital accumulation and enhances consumers' productivity. This, in turn, frees up time and financial resources, facilitating higher rates of reproduction and population growth. Unlike Jones (2022), the development of the data economy can drive high population and economic growth without the need for distortionary policy measures.

Keywords: Population decline, digital economy, endogenous growth, human capital accumulation

JEL Classification: I12, J11, O41