Dynamic analysis of demographic change and human capital accumulation in an R&D-based growth model

• Published in: Journal of economics (Vienna, Austria) Vol. 130; no. 3; pp. 225 - 248
• Main Author: Okada, Kohei
• Format: Journal Article
• Language: English
• Published: Vienna Springer 01.08.2020; Springer Vienna; Springer Nature B.V
• Subjects: Accumulation; Capital formation; Demographic change; Demographics; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Endogenous; Fertility; Game Theory; Growth models; Growth rate; Human capital; Macroeconomics/Monetary Economics//Financial Economics; Microeconomics; Poverty; Public Finance; Public health; R&D; Research & development; Social and Behav. Sciences; R&D; J10; Demographic change; I25; O30; Human capital accumulation; O10
• ISSN: 0931-8658; 1617-7134
• DOI: 10.1007/s00712-020-00692-x

Employing an overlapping-generations model of R&D-based growth with endogenous fertility, mortality, and education choice, we examine how demographic changes and human capital accumulation influence R&D activity. We show that multiple steady states can exist in this economy. One steady state has a high level of human capital and the other has a low level. In the steady state with high (low) level of human capital, there is a high (low) level of R&D activity, a low (high) fertility rate, and a high (low) old-age survival rate. In addition, we show that the government can steer an economy away from a poverty trap trajectory by investing in public health. We also show that an improvement in the government's public health policy has an inverted U-shaped effect on the growth rate at the steady state.