Analyses & Alternatives (분석과 대안)

Korea Consensus Institute(KCI) (사단법인 코리아컨센서스연구원)
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Compressed Demographic Transition and Economic Growth in the Latecomer

  • Received : 2023.05.21
  • Accepted : 2023.06.02
  • Published : 2023.06.30
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Abstract

This study aims to solve the entangled loop between demographic transition (DT) and economic growth by analyzing cross-country data. We undertake a national-level group analysis to verify the compressed transition of demographic variables over time. Assuming that the LA (latecomer advantage) on DT over time exists, we verify that the DT of the latecomer is compressed by providing a formal proof of LA on DT over income. As a DT has the double-kinked functions of income, we check them in multiple aspects: early maturation, leftward threshold, and steeper descent under a contour map and econometric methods. We find that the developing countries (the latecomer) have speedy DT (CDT, compressed DT) as well as speedy income such that DT of the latecomers starts at lower levels of income, lasts for a shorter period, and finishes at the earlier stage of economic development compared to that of developed countries (the early mover). To check the balance of DT, we classify countries into four groups of DT---balanced, slow, unilateral, and rapid transition countries. We identify that the main causes of rapid transition are due to the strong family planning programs of the government. Finally, we check the effect of latecomer's CDT on economic growth inversely: we undertake the simulation of the CDT effect on economic growth and the aging process for the latecomer. A worrying result is that the CDT of the latecomer shows a sharp upturn of the working-age population, followed by a sharp downturn in a short period. Compared to early-mover countries, the latecomer countries cannot buy more time to accommodate the workable population for the period of demographic bonus and prepare their aging societies for demographic onus. Thus, we conclude that CDT is not necessarily advantageous to developing countries. These outcomes of the latecomer's CDT can be re-interpreted as follows. Developing countries need power sources to pump up economic development, such as the following production factors: labor, physical and financial capital, and economic systems. As for labor, the properties of early maturation and leftward thresholds on DTs of the latecomer mean that demographic movement occurs at an unusually early stage of economic development; this is similar to a plane that leaks fuel before or just before take-off, with the result that it no longer flies higher or farther. What is worse, the property of steeper descent represents the falling speed of a plane so that it cannot be sustained at higher levels, and then plummets to all-time lows.

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