Emissions Scenarios - IPCC

120 Scenario Driving Forces
when changes in quality and composition of factors of
production are accounted for, increases in per capita economic
output (productivity) remain largely unexplained, a "residual"
in the analysis remains unclear (for a review, see Griliches,
1996). The "residual," is usually ascribed to "advances in
knowledge and technology" which, unlike capital and labor,
cannot be measured directly. However, it might also be the
result of other influences, which potentially include growing
contributions to the economy by non-market or under-priced
natural resources. Thus, considerable measurement and
interpretative uncertainties remain in the explanation of
productivity growth.
New approaches and models extended the neoclassic growth
model (e.g., Romer, 1986; Lucas, 1988; Grossmann and
Helpman, 1991, 1993). In these, increases in human capital
through education and the importance of technological
innovation via directed activity (research and development
(R&D)) complement more traditional approaches, which
represents a return to the earlier work of Schumpeter (1943),
Kuznets (1958), Nelson et al. (1967), and Landes (1969).
3.3.4.2. Influence of Demographics
Neoclassic economic growth theory embraces as a general
principle the notion that long-term per capita income growth
rate is independent of population growth rate. Thus, a rapidly
growing population should not necessarily slow down a
countries' economic development. Blanchet (1991)
summarizes the country-level data. Prior to 1980, the
overwhelming majority of studies showed no significant
correlation between population growth and economic growth
(National Research Council, 1986). Recent correlation studies,
however, suggest a statistically significant, but weak, inverse
relationship for the 1970s and 1980s, despite no correlation
being established previously (Blanchet, 1991). As noted in
Section 3.2, the reverse effect of income growth on
demographics is much clearer.
Population aging is another consideration advanced as having
significant influence on economic growth rates. Reductions in
workforce availability and excessive social security and
pension expenditures are cited as possible drivers. Section 3.2
above concluded that evidence for a strong negative impact is
rather elusive. Two additional points deserve consideration.
First, population aging is not necessarily the best indicator for
workforce availabifity, because while the percentage of the
elderly, in particular those of retirement age, increases, the
proportion of younger people (of pre-work or -career age)
decreases. As a result, the percentage of the working age
population (age 15 to 65 years) in the total population
changes less dramatically, even in scenarios of pronounced
aging. For instance, in the IIASA low population scenario (7
billion world population by 2100) discussed in Section 3.2,
the percentage of age categories 15 to 65 years changes from
62% in 1995 to 54% by 2100. This percentage falls to 48% in
the regions with the highest population aging (Lutz et al.,
1996).
A second point is that these demographic variables only
indicate potential workforce numbers. Actual gainfully
employed workforce numbers are influenced by additional
important variables - unemployment levels, female workforce
participation rates, and finally working time. The importance
of these variables can be illustrated by a few statistics.
Currently, about 40 million people are unemployed in the
OECD countries (UNDP, 1997). The female workforce
participation ratios vary enormously, from about 10% to 48%
of the workforce (as in Saudi Arabia and Sweden, respectively;
UNDP, 1997), and have been changing dramatically over time.
For the US, for instance, female workforce participation rates
increased from 17% in 1890 (US DOC, 1975) to 45% in 1990
(UNDP, 1997). Similar dramatic long-term changes have
occurred in the number of working hours in all industrial
countries. Compared to the mid-19* century, the number of
average working hours has declined from about 3000 to about
1500 (Maddison, 1995; Ausubel and Grübler, 1995). However,
in most OECD countries the trend in working time reductions
has slowed to a halt since the early 1980s (Marchand, 1992).
Thus, unless the rather implausible assumption is made that
with population aging all these other important determinants of
labor input remain unchanged, the impacts of aging are likely
to be compensated by corresponding changes in these variables
(e.g. greater female workforce participation, earlier retirement,
etc.). Finally, it must be reiterated that quahtative labor force
characteristics, most notably education, are a more important
determinant for long-ran productivity and hence economic
growth than mere workforce numbers.
3.3.4.3. Influence of Social and Institutional Changes
The importance of social and institutional changes to provide
conditions that enabled the acceleration of the Industrial
Revolution is widely acknowledged (Rosenberg and Birdzell,
1986, 1990). Rostow (1990) and Landes (1969) identify many
social and cultural factors in the "preconditions for economic
acceleration" and in the process of economic development.
The importance of institutions and stable social environments
is also increasingly discussed in the literature concerned with
current economic growth (World Bank, 1991, 1998a). Barro
(1997), and Barro and Sala-I-Martin (1995) report a
statistically significant relationship between rule-of-law and
democracy indices with per capita GDP growth. Law
enforcement and legal rights are important indicators for
human development in their own right, but enforceable legal
contracts are equally important for markets to function. Other
socio-institutional factors have been identified that are
important to productivity and economic growth: education is
mentioned above. Income inequaUty (and resultant social
tensions) also appears to coirelate negatively with economic
development (Worid Bank, 1998a; Maddison, 1995).
Strong parallels run between social, institutional, and
technological changes (Grübler, 1998a; OECD, 1998a). In
particular, many features common to the processes of evolution