Working Paper: NBER ID: w10817
Authors: David E. Bloom; David Canning
Abstract: Transitions from high mortality and fertility to low mortality and fertility can be beneficial to economies as large baby boom cohorts enter the workforce and save for retirement, while rising longevity has perhaps increased both the incentive to invest in education and to save for retirement. We present estimates of a model of economic growth that highlights the positive effects of demographic change during 1960-95. We also show how Ireland benefited from lower fertility in the form of higher labor supply per capita and how Taiwan benefited through increased savings rates. We emphasize, however, that the realization of the potential benefits associated with the demographic transition appears to be dependent on institutions and policies, requiring the productive employment of the potential workers and savings the transition generates. Economic projections based on an "accounting" approach that assumes constant age-specific behavior are likely to be seriously misleading.
Keywords: demographic change; economic growth; labor supply; savings
JEL Codes: J11; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| demographic transitions (J11) | economic growth (O49) |
| demographic changes (J11) | economic performance (P17) |
| longevity (C41) | savings behavior (D14) |
| demographic changes (J11) | economic benefits (D61) |
| effective policies (D78) | economic benefits (from demographic changes) (J11) |
| demographic changes (J11) | unemployment (J64) |