Bi-Demographic Changes and Current Account using SVAR Modeling

TL;DR

This paper investigates how bi-demographic changes influence the current account and economic growth using SVAR modeling, revealing positive long-term effects of emigrant workers and their complementary role with native workers.

Contribution

It introduces a SVAR-based approach to analyze the dynamic effects of bi-demographic shifts on current account and growth, highlighting the role of skilled emigrants.

Findings

Long-run positive impact of domestic population growth on economic growth.

Emigrant workers' positive contribution to current account offsets native population effects.

Emigrants are more complements than substitutes for native workers.

Abstract

The paper aims to explore the impacts of bi-demographic structure on the current account and growth. Using a SVAR modeling, we track the dynamic impacts between these underlying variables. New insights have been developed about the dynamic interrelation between population growth, current account and economic growth. The long-run net impact on economic growth of the domestic working population growth and demand labor for emigrants is positive, due to the predominant contribution of skilled emigrant workers. Besides, the positive long-run contribution of emigrant workers to the current account growth largely compensates the negative contribution from the native population, because of the predominance of skilled compared to unskilled workforce. We find that a positive shock in demand labor for emigrant workers leads to an increasing effect on native active age ratio. Thus, the emigrants appear to be more complements than substitutes for native workers.