Possible Paths for GDP Per Capita : Simulation with a Demographic Growth Model

Berde, Éva and Kuncz, Izabella (2017) Possible Paths for GDP Per Capita : Simulation with a Demographic Growth Model. HITELINTÉZETI SZEMLE / FINANCIAL AND ECONOMIC REVIEW, 16 (4). pp. 36-57. ISSN 1588-6883 (nyomtatott); 2416-3201 (online)

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Abstract

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), modifying the original framework in several respects. We present the exogenous fertility and survival rates in different demographic scenarios, and then we derive the simulation paths for GDP per capita from these. A word of caution regarding our results: the simple structure of our model disregards several factors potentially influencing growth. When concentrating solely on the impact of changes in fertility and mortality rates, our simulation results suggest that a drop in the total fertility rate, even to slightly below the replacement level, and even in the context of a relatively high survival rate, may increase GDP per capita. However, in the case of an extremely low total fertility rate and a high survival rate, an economic downturn can be expected.

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