The Effects of Population Aging on Economic Growth of Iran through the fertility rate and life expectancy (Overlapping Generation Model Approach)

population aging refers to an age imbalance of the population so that the ratio of young population decreases while aged population grows. Decrease in fertility rate and growing life expectancy are the two key factors in emergence of population aging. The macro economy effects of population aging on economic growth was examined based on the effects of two factors including decrease in fertility rate and increase in life expectancy.

The effects of population aging on economic growth in Iran and some of the macro economy variables were examined using a modified overlapping generation model (55 cycles). Simulations were performed in MATLAB for the two scenarios of decreasing fertility rate and increasing longevity and their effects on economic growth of Iran. The initiation year was 1994 and the model was calibrated using Iran economy data from 1994 to 2017. The forecasts were produced for the years after 2017 until 2050.

The results showed that the decline in the growth rate of birth rate had a notable effect on the decrease of the growth rate of real and per capita GNP. In addition, an increase in life expectancy or longevity did not have a negative effect on the growth rate of real GNP and increased per capita GNP.

Until 2016, more than 70% of Iranian population were at working age (15-64) and less than 6% were at old age. Assuming that fertility rate remains at replacement level, the country will face a serious challenge by the aging population by 2030 and the population over 65 will constitute 15% of the population by 2045. Fast and wide population changes have placed Iran among the countries that expect an aged population by the mid-21st century. The factors effective in the aging population in Iran include increase in life expectancy and decrease in fertility rate.