EconPapers    
Economics at your fingertips  
 

Demographic Structure, Knowledge Diffusion, and Endogenous Productivity Growth

Colin Davis, Ken-ichi Hashimoto and Ken Tabata

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper considers how increasing longevity and declining birth rates affect market entry and endogenous productivity growth in a two-country model of trade. In each country, the demographic transition to an older population induces a contraction in the labor force through a decline in the working-age population. Firm-level investment in process innovation generates productivity growth, and with imperfect knowledge diffusion the country with the larger labor force has a greater share of firms with higher productivity levels. In this framework, population aging reduces a country’s labor supply, share of industry, and relative productivity. If the country with the smaller labor force experiences population aging, knowledge spillovers improve and the rate of productivity growth rises, as the level of market entry falls. Alternatively, population aging in the country with the larger labor force weakens knowledge spillovers and lowers the rate of productivity growth, but has an ambiguous affect on market entry. We show that the effects of population aging may be reversed by extending retirement age, and consider the welfare implications for demographic transition and retirement age extension arising in our framework through a quantitative analysis based on population data for the United States and Western Europe.

Date: 2020-12
New Economics Papers: this item is included in nep-age, nep-cse, nep-dge, nep-gro, nep-knm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.iser.osaka-u.ac.jp/library/dp/2020/DP1113.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1113

Access Statistics for this paper

More papers in ISER Discussion Paper from Institute of Social and Economic Research, Osaka University Contact information at EDIRC.
Bibliographic data for series maintained by Librarian ().

 
Page updated 2021-04-11
Handle: RePEc:dpr:wpaper:1113