An economic analysis of demographic transition and modern economic growth: A modeling approach for the Republic of Korea.

The link between population growth and economic growth has been one of the fundamental issues in the literature from the time of Malthus to more recent developments in endogenous growth theory. Numerous models produce various results, but few use time series analysis with an endogenously determined population. This dissertation examines the link between population growth and economic growth by means of a comprehensive approach. First, it presents a theoretical description of the life-cycle of a developing economy under high initial population growth. It is shown that the economy develops with a unique pattern of high growth and fast structural changes. Second, it develops a general equilibrium model based on the data from the last three decades in Korea. The estimated model presents a quantitative description of how unusually high economic growth has taken place with a rapid demographic transition: (1) capital investment is accelerated in response to output growth; (2) saving rates experience an accelerated increase due largely to a sharp decline in the child dependency ratio; and (3) fertility rates decline rapidly in association with continued economic growth, causing a fall in the dependency ratio. Finally, it reports counterfactual population experiments using three demographic regimes. A rapid decline in fertility generates positive growth effects and accelerates structural changes during the 30 year period. A fall in the total fertility rate (TFR) of.78 births is associated with a higher total output and a higher per capita income, 1.57 and 7.73 percent respectively. The lower TFR is also accompanied by an increase in employment by.7 percent, a primary employment share that is smaller by.34 percentage points, a domestic savings ratio 11.2 percent higher, an investment-savings gap smaller by 3.4 percentage points, and a child dependency ratio smaller by 6.6 percentage points. Low mortality generates similar positive growth and structural effects. Therefore, simulation results reveal some interesting implications. First, a decline in fertility, and thus in population growth, may have positive effects on economic growth as well as on per capita income. Second, initial low mortality, and thus high initial population growth itself, may not necessarily result in lower economic growth; an economy with such a demographic condition may achieve high economic growth, depending on its responses to high population growth. Consequences may also be observed in the structure of the economy--an economy with high initial population growth may undergo earlier structural changes in the labor and capital markets, and therefore experience a faster demographic transition.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/103924/1/9423163.pdfDescription of 9423163.pdf : Restricted to UM users only