The Korean Journal of Economic Studies
Attenuating Economic Shocks of Demographic Transition with Female Labor
Sun-Bin Kim (Yonsei University), Jong-Suk Han (Ajou University) and Jay H. Hong (Seoul National University)Year 2021Vol. 69No. 3
AbstractThis paper quantitatively analyzes how much an economic shock due to demographic transition can be attenuated by improving female labor quantitatively and qualitatively. We build a heterogeneous-agent overlapping generation model explicitly distinguishing male and female, and calibrate the model to match macroeconomic features in 2017. We implement the population projection from Statistics Korea from 2017 and 2067, and measure the economic impact of demographic transition in Korea. We find that per capita output falls to 81% in the new steady state and the lowest value along the transition path turns out to be 65% of the initial steady state value. When the female productivity is enhanced to the male level, per capita output level in the new steady state and the lowest value along the transition are improved to 95% and 77% of the initial steady state value. If only disutility of female labor is dampened to male level, per capita output in the new steady state and along the transition is improved to 85% and 65%. Our results indicate that boosting female labor quantitatively and qualitatively considerably attenuates negative shocks of demographic transition.