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  • P-ISSN 2586-2995
  • E-ISSN 2586-4130
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KDI Journal of Economic Policy. Vol. 39, No. 2, May 2017, pp. 25-51

https://doi.org/10.23895/KDIJEP.2017.39.2.25

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Korea’s Demographic Transition and Long-Term Growth Projection Based on an Overlapping Generations Model

KYOO HO KWON

Author & Article History

Manuscript received 26 July 2016; revision received 28 July 2016; accepted 19 December 2016.

Abstract

This paper employs an Overlapping Generations Model to quantify the impacts of Korea’s demographic transition toward an older population on the total output growth rate. The model incorporates the projected population through 2060 according by Statistics Korea. The effects of the low fertility and increased life expectancy rates are studied. The model is considered suitable for analyzing the effects of demographic changes on the Korean economy. Under the assumption that the TFP growth rate will not slow considerably in the future, remaining at 1.3% per annum, the gross output growth rate of the Korean economy is projected to slow to 1.1% per annum in the 2050s, from 4.0% in the 2000s. The shrinking workforce due to the decline in fertility plays a significant role in the deceleration of the Korean economy. The increased life expectancy rate is expected to mitigate the negative effect, but the magnitude of its effect is found to be limited.

Keywords

Computable General Equilibrium Models, Life Cycle, Aggregate Supply, Population Aging

JEL Code

C680, E210, J110

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