Dynamics of an Economic Growth Model with New Stylized Facts

The last two decades’ social and economic events have proven the importance of feedback mechanisms for determining the income dynamics of the countries of the world. The first feedback mechanism is the neglected endogenous population: the inverse relationship between income and population growth. The second feedback mechanism is—partly as a consequence of the previous one—aging society: the simultaneous reduction of labour force and increasing economic cost of the dependency ratio, additionally, the lower technological adaptability of the aging society to new technological innovations. The third feedback mechanism is the rising functional income inequality: the increasing relative income share of the rich. The result of this study is the following: the potential qualitative growth effects of three new stylized facts that emerged in recent literature—(1) aging society, (2) endogenous population growth, and (3) varying share of factors income—were investigated in a growth framework by simulations. The consequence of these mechanisms is a qualitatively new national and global income path in the twenty-first century compared to that of the twentieth century. The results of these feedback mechanisms question not only the stability of social and economic performance but the sustainability of these systems, as well.