Demographic Dividends, Depopulation, and Importance of Agriculture in Japan: the Past, the Present, and the Future

Tomoko Kinugasa, Kobe University
Mitoshi Yamaguchi, Kobe University

We investigate the effects of demographic change on agriculture and non-agriculture in Japan while considering capital accumulation and total population and labor. Combining the overlapping generations model with the three generations and general equilibrium growth accounting models, we simulate the effect of demographic change on agricultural and non-agricultural inputs and outputs. Our simulation analyses show that demographic change greatly influenced agriculture and non-agriculture through capital accumulation although the influences of total population and labor were not negligible. Remarkable demographic dividends like the decline of young dependents and increase of adult longevity greatly influenced capital accumulation in Japan in the 1950s to the 1990s, which decreased the importance of agriculture. In the future, aggregate capital in Japan will presumably decrease due to a decline of the working age population, which may result in the disappearance of the advantages of non-agriculture and an increase of the importance of agriculture.