Researchers at EF are exploring in a variety of projects and in collaboration with researchers at inter alia the Vienna Institute of Demography, the Vienna University of Economics and Business and the Harvard School of Public Health the nexus between population and economic change. This includes work on the impact of population ageing and population decline on human capital accumulation and sustained economic growth, the long-run impact of medical innovation on longevity and economic growth, as well as studies into the roll out of population changes over time.

The optimal momentum of population growth and decline

About 50 years ago, Keyfitz (1971) asked how much further a growing human population would increase if its fertility rate were immediately to be reduced to replacement level and remain there forever. The reason for demographic momentum is an age–structure inertia due to relatively many potential parents because of past high fertility. Although nobody expects such a miraculous reduction in reproductive behavior, a gradual decline in fertility in rapidly growing populations seems inevitable. As any delay in fertility decline to a stationary level leads to an increase in the momentum, it makes sense to think about the timing and the quantum of the reduction in reproduction. More specifically, we consider an intertemporal trade-off between costly pro- and anti-natalistic measures and the demographic momentum at the end of the planning period. This paper uses the McKendrick–von Foerster partial differential equation of age–structured population dynamics to study a sketched problem in a distributed parameter control framework. Among the results obtained by applying an appropriate extension of Pontryagin’s Maximum Principle are the following: (i) monotony of adaptation efforts to net reproduction rate and convex decrease/concave increase (if initial net reproduction rate exceeds 1/is below 1); and (ii) oscillating efforts and reproduction rate if, additionally, the size of the total population does not deviate from a fixed level.

Feichtinger, G. & Wrzaczek, S. (2024). The optimal momentum of population growth and decline. Theoretical Population Biology 155 51-66. 10.1016/j.tpb.2023.12.002.

Rising Longevity, Increasing the Retirement Age, and the Consequences for Knowledge‐based Long‐run Growth

We assess the long-run growth effects of rising longevity and increasing the retirement age when growth is driven by purposeful research and development. In contrast to economies in which growth depends on learning-by-doing spillovers, raising the retirement age fosters economic growth. How economic growth changes in response to rising life expectancy depends on the retirement response. Employing numerical analysis, we find that the requirement for experiencing a growth stimulus from rising longevity is fulfilled by the USA, nearly met by the average OECD economy, but missed by the European Union and by Japan.

Kuhn, M. & Prettner, K. (2023). Rising Longevity, Increasing the Retirement Age, and the Consequences for Knowledge‐based Long‐run Growth. Economica 90 (357) 39-64. 10.1111/ecca.12445.

Does human capital compensate for population decline?

Fertility rates have been falling persistently over the past 50 years in most rich countries. Simultaneously, the trend of outward migration from poorer to richer countries has been steady. These two forces contributed to population aging, and – in an increasing number of countries – even to population decline. In this paper, we quantify the effect of decreasing fertility on the aggregate human capital stock. In doing so we take into account that parents with fewer children may raise investments in their children's education and health. We find that the human capital impact of declining fertility is partly compensated through such responses when including the full set of countries in our regressions. For the subset of countries that experience population decline, the compensatory effect is weaker and, in many specifications, even insignificant.

Siskova, M., Kuhn, M., Prettner, K., & Prskawetz, A. (2023). Does human capital compensate for population decline? The Journal of the Economics of Ageing 26 e100469. 10.1016/j.jeoa.2023.100469.

Medical Innovation, Life Expectancy, and Economic Growth

Despite the increasing recognition of the importance of health for economic growth, the role of medical innovation in this process remains largely unexplored. Specifically, what are the causal effects of medical innovation on economic growth, and what shape does this relationship take? To address these questions, we propose an R&D-based economic growth model with overlapping generations, wherein life expectancy depends on healthcare utilization and medical innovation, and we then empirically test the model’s implications. Our findings reveal a clear causal pathway from medical innovation to economic growth, with increasing life expectancy serving as a key transmission channel. In the early stages of development, medical innovation does not have a positive effect on economic growth, whereas in intermediate stages, a positive and significant effect emerges. In late stages of development, where life expectancy is already very high, the effect becomes weaker and potentially negative because health improvements are increasingly difficult to achieve and become more resource-intensive.

Kuhn, M., Minniti, A., Prettner, K., & Venturini, F. (2023). Medical Innovation, Life Expectancy, and Economic Growth. SSRN Electronic Journal 10.2139/ssrn.4491818.