ERI Discussion Paper Series No.93
The Endogenous Economic Growth under the declining Population Growth:
Simulation Analysis by the Overlapping Generations Model

May 2000
Akira Sadahiro
(Director General, Economic Research Institute, Economic Planning Agency)
Manabu Shimasawa
(Coordination Bureau, Economic Planning Agency)


We analyze future Japanese economic situation, which is facing with decreasing of population growth, by using Computable Overlapping Generations (OLG) model based on the endogenous growth theory. We incorporate Human Capital Stock Sector into the traditional (Auerbach and Kotlikoff type) Computable OLG model. So, endogenous growth is generated by the process of the accumulation of physical and human capital stock in this model. In this paper, we conduct some simulations under the alternative population growth patterns and some the sensitivity analysis with respect to the some key parameters of our model. And also, we show the simulation results of the long-run growth path of the Japanese economy through 2050 under the recent demographic projections by the Japanese Government. According to it, in terms of population growth rate, it will decrease by 0.5% per annum in 2007 to 2050. The aged ratio was 16.7% in 1999, and will increase sharply to the ratio of 25.2% in 2015 and 28% in 2030. The main results of this paper are as follows; First, the importance of continuous human capital investment was confirmed in order to assure the sustainable economic growth. The endogenously determined growth rate of human capital more than offsets the negative population growth rates, which, in turn, assures the positive aggregate economic growth rate as well as per positive capita growth rate. Second, the individual has an incentive to allocate his/her time into schooling investment for accumulating his/her human capital in the phase of declining population growth. Third, there is the negative correlation between the growth rate of labor supply and human capital. From these simulation results, we can conclude that in order to attain the sustainable economic growth, more policy priority should be put on the schooling activity and training activity of the individuals, which in turn increases the level of human capital.

Structure of the whole text(PDF-Format 3file)

  1. Abstract別ウィンドウで開きます。(PDF-Format 474 KB)
  2. page1
    1. Introduction
  3. page5
    2. Model Structure
  4. page10
    3. Model Property and Simulation Results
  5. page14
    4. Conclusion
  6. page23
  7. page36
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