Demographic Forecasts and Volatility of Investment Rates vs. Labor Productivity Trajectories

Abstract

In the article the authors attempted to develop the neoclassical model of economic growth, repealing two assumptions regarding the Solow growth model. First of all, the authors assume that the growth path of the number of employees is increasing asymptotically to a fixed value, not to infinity as in the Solow model. The growth paths of the number of employees were determined based on demographic forecasts and the economic activity coefficient, which in the paper is understood as the ratio of the number of employees to the number of people. Secondly, the authors repeal the assumption of a fixed investment rate by taking into account the trend of changes in investment rates (a growing or declining trend). The theoretical model obtained was subjected to calibration and then numerical simulations were carried out. It was assumed that investment rates in the Polish economy decrease (from 25 to 15%) or grow (from 15 to 25%). Numerical simulations were based on demographic forecasts for the Polish economy up to 2050. Moreover, two scenarios for shaping the economic activity coefficient were considered: realistic one when in the period 2000-2050 it increased from 0.38 to 0.5. In the second scenario, it was optimistic that the increase would be 50% higher than in the first option and in 2050 it would reach 0.56. Important conclusions from the study can be presented as follows: (i) the population decline can be offset by the growing economic activity rate and therefore does not have a negative impact on economic growth, (ii) the negative impact of demographic changes on economic growth can also be offset by growing investment rates.

The Solow Model of Economic Growth

“…The sine function is adopted to describe changes in the investment rate because investment depends to a great extent on business cycles that are characterized by periodic fluctuations. Similar analyzes are contained in the studies by Bolińska, Dykas, Mentel and Misiak (2019), where the authors, in addition to fluctuations on the investment side, consider a growth rate of the number of workers that changes in time and in a long run determine the exponential growth path of the number of workers approaching a constant asymptote.…”

Socio-Demographic Potential of Human Resources in the Visegrad Regions

“…The economic and social development of economic units goes hand in hand with the development of regions and human potential. Economic growth is a multidimensional process, and a part of a clear connection between the size of population, capital resources, investment or technical progress (Bolińska et al, 2019). Majerová (2019) maintains that differences in the level of the socio-economic indicators should be maintained within sustainable limits for the sake of the welfare of the country as a whole.…”

Population Forecast with Focus on Emigration: Scenarios for the Case of Peripheral Region

“…Forecasting is a tool for understanding the scale of population change in case of differentiated scenarios. Demographic forecasts in scientific literature covers economic and regional areas (e.g., Dykas, Mentel, & Misiak, 2018;Bolińska et al, 2019;Miranda & Lima, 2011;Fogel, 1994;Śleszyński, Kubiak, & Korcelli-Olejniczak, 2020). In regional aspect, the focus is put on demographic issue of population change in territories with differentiated level of development (e.g., Śleszyński, Kubiak, & Korcelli-Olejniczak, 2020), on population at working age and rural population (e.g., Parshukov et al 2016).…”

“…Significance of demographic forecasting to economy is demonstrated by scientific research in the areas of, for example, investments and labour productivity (e.g. Bolińska et al, 2019), economic growth and number of employees (e.g. Dykas, Mentel, & Misiak, 2018), gross domestic product (Miranda & Lima, 2011), and economic policy (e.g.…”