A counterfactual method for demographic changes in overlapping generations models

This paper applies a computable overlapping generations model (OLG) to Korea's population projection. While previous works feed into their models total factor productivity (TFP) recovered from growth accounting, or assume a fixed level of it, this study attempts to fit TFP growth to match observed GDP for the 1960-2017 period. In addition, this study also evaluates the effects of different formations of expectations, such as bounded rationality and the ramifications of immigration, by means of a counterfactual exercise with various population projection scenarios. The exercise reveals that a larger inflow of immigrants, which often put forward as a remedy against Korea's diminishing population, has a limited effect on the course of its economy