From Population Growth to TFP Growth

Hiroshi Inokuma () and Juan Sanchez

No 2023-006, Working Papers from Federal Reserve Bank of St. Louis

Abstract: A slowdown in population growth reduces business dynamism by increasing the share of older firms. We explore how this affects productivity growth using a business dynamics model with endogenous productivity. The growth rate of older firms is a key factor in determining the impact of population growth on productivity. Quantitatively, this effect is substantial for both the U.S. and Japan. In the U.S., slowing population growth reduces TFP growth by 0.3 percentage points from 1970 to 2060, with an even larger effect in Japan. However, TFP growth reacts slowly due to short-run counterbalancing factors.

Keywords: population growth; economic growth; firm dynamics; demographics; productivity; innovation; total factor productivity (TFP); Japan (search for similar items in EconPapers)
JEL-codes: E20 J11 O33 O41 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2023-03-27, Revised 2025-09-01
New Economics Papers: this item is included in nep-ent, nep-gro and nep-lab
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DOI: 10.20955/wp.2023.006

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