Human capital, technological progress and the demographic transition*

Financial support from the Max Kade Foundation is gratefully acknowledged. The paper was presented at the workshop on ‘Nonlinear Demography’ at the Max Planck Institute for Demographic Research in Germany, Rostock, May 1998. The authors are grateful for comments and suggestions from participants at the workshop. Comments from a referee have essentially helped to clarify the model structure.

We emphasize the importance to consider components of population growth — fertility and mortality ‐ separately, when modeling the mutual interaction between population and economic growth. Our model implies that two countries with the same population growth will not converge towards the same level of per capita income. The country with the lower level of birth and death rates will be better off in the long run. Introducing a spill over effect of average human capital on total productivity our model implies multiple equilibria as illustrated in Becker el al. (1990) and Strulik (1999). Besides the existence of a low and high level equilibrium ‐ as characterized by low and high levels of per capita output respectively ‐ we show the existence of multiple low level (Malthusian) equilibria. Initial conditions and parameters of technological progress and human capital investment determine whether an economy is capable to escape the low level equilibrium trap and to enjoy sustained economic growth.

Keywords:

• population growth
• economic growth
• non‐linear model
• capital
• equilibrium

Notes

Financial support from the Max Kade Foundation is gratefully acknowledged. The paper was presented at the workshop on ‘Nonlinear Demography’ at the Max Planck Institute for Demographic Research in Germany, Rostock, May 1998. The authors are grateful for comments and suggestions from participants at the workshop. Comments from a referee have essentially helped to clarify the model structure.

Corresponding author: Fax: + 49 (0)381 2081 441, Tel: + 49 (0)381 2081 141, e‐mail: [email protected]. The views expressed in this paper are the authors’ own views and do not necessarily represent those of the Max Planck Institute for Demographic Research.