Demographic volatility and economic growth: convention and beyond |
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Authors: | Tapas Mishra Claude Diebolt |
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Institution: | (1) Univerisity of Alabama, Tuscaloosa, AL, USA |
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Abstract: | Following the success of endogenous growth theory, recent empirical examinations of the demography–economic growth construct
established that components of demographic change can provide meaningful and clear insights into the direction and impact
of demographic variation in economic growth. While theoretical justification and empirical support to the claim cannot be
denied, confusions seem to have arisen whether an empirical growth construct will only be limited to demographic dynamics
or the model can entertain other non-demographic variables. In a leading research, Kelley and Schmidt (1995, 2001) provided
seemingly ambiguous evidence that addition of non-demographic variables can add explanatory power to the growth regression.
While subsequent empirical growth models have largely followed the convention as in KS, some important considerations like
the stochastic effects of demographic system on economic growth seem to be missing. This paper attempts to address the concerns
by suggesting a long-memory demographic system and embedding stochastic demographic characteristics in a standard Solow–Swan
model, which also forms the basis of convergence pattern. We empirically show that significant stochastic shocks exist in
the demographic components which could have contributed to the growth volatility across nations. We suggest that empirical
growth models should account for stochastic demographic characteristics to enable economic policy makers with correct information
about the current and future state of evolution of the demography–economic system. |
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Keywords: | |
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