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Institutet för Framtidsstudier - Institute for Futures Studies Arbetsrapport, Institutet för Framtidsstudier - Institute for Futures Studies

No 2006:9:
Growth and Longevity from the Industrial Revolution to the Future of an Aging Society

David de la Croix, Thomas Lindh () and Bo Malmberg ()

Abstract: Aging of the population will affect the growth path of all countries. To assess the historical and future importance of this claim we use two popular approaches and evaluate their merits and disadvantages by confronting them to Swedish data. We first simulate an endogenous growth model with human capital linking demographic changes and income growth. Rising longevity increases the incentive to get education, which in turn has ever-lasting effects on growth through a human capital externality. Secondly, we consider a reduced-form statistical model based on the demographic dividend literature. Assuming that there is a common DGP guiding growth through the demographic transition, we use an estimate from post-war global data to backcast the Swedish historical GDP growth. Comparing the two approaches, encompassing tests show that each of them contains independent information on the Swedish growth path, suggesting that there is a benefit from combining them for long-term forecasting.

Keywords: aging population; growth path; long-term forecasting; (follow links to similar papers)

JEL-Codes: J11; (follow links to similar papers)

37 pages, June 2006

ISSN 1652-120X; ISBN 13: 978-91-89655-92-8; ISBN 10: 91-89655-92-3

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