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The Optimum Growth Rate for Population in the Neoclassical Overlapping Generations Model

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Wolfgang Kuhle

In the course of the last century, birth rates in the OECD have fallen significantly. This study is concerned with the long run factor price and welfare implications of this decline in birth rates. The relevant models, i.e. the pure consumption loan economy, the neoclassical one-sector growth model, variations of the neoclassical overlapping generations model, and the economic dependency approach are utilized to answer this question. The study features exact general conditions for the existence of an interior optimum growth rate for population in the neoclassical overlapping generations model and, hence, is closing a gap in the preceding literature. Subsequent empirical testing suggests that these conditions for the validity of the Serendipity Theorem are probably satisfied.
Contents: Demographic change – Overlapping generations – Serendipity Theorem – Exact general necessary and sufficient conditions – Optimal population in a laissez-faire economy with and without social security – The economic dependency ratio and optimal population.