The growth effects of population aging in an economy with endogenous technological progress

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Abstract

We address the effects of population aging on economic growth, taking account of its growth-delaying effects, through the reduction of capital accumulation and labor force, and the R&D investment reduction due to its lowered return resulting from reduced market size, as well as its growth-promoting effects, through the increase in educational investment due to decrease in the number of child per parent. The policy simulations with a general equilibrium model and its calibration, reflecting the Korean economy, show that: (1) the population aging delays technological progress as well as quantitative economic growth; (2) the government subsidies to R&D and educational investment can partly compensate for the loss in economic growth due to the population aging, but they cannot deal with the problem fundamentally; and (3) the optimal subsidy rates to R&D and education are quite high, ranging from 50 to 70% to R&D and from 70 to 80% to education.

Original languageEnglish
Pages (from-to)51-80
Number of pages30
JournalKorean Economic Review
Volume29
Issue number1
StatePublished - 2013

Keywords

  • Educational Investment
  • Growth
  • Population Aging
  • Research and Development

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