Bank of Finland's long-run forecast framework with human capital

Arto Kokkinen, Meri Obstbaum and Petri Mäki-Fränti

No 10/2021, BoF Economics Review from Bank of Finland

Abstract: Population ageing constitutes a central challenge to Finland. Understanding the Finnish economy's likely future trajectory and the key sources of growth is important for the design of policies to counteract these adverse long-term trends. For this purpose, we develop a novel long-run forecast framework based on enodogenous growth theory with human and fixed capital. A central result is a pronounced projected decrease in human capital, substantially weighing on the long-run GDP outlook for Finland. To revert these trends substantial policy efforts are needed. Unless the decline in human capital can be prevented by increasing fertility, skilled immigration, education or employment, even reaching a growth rate of one per cent after the 2040s would require significant measures to increase new fixed capital investments with new technology.

Keywords: Forecasting; GDP; Labour productivity; Human capital; Modern growth theory (search for similar items in EconPapers)
JEL-codes: E17 E24 O11 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-eec, nep-gro and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofecr:102021

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