Workforce Aging, Growth and Productivity

Mathilde Esposito ()
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Mathilde Esposito: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université

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Abstract: In the literature on secular stagnation, demographic aging is widely blamed for lowering the IS curve of aggregate demand and therefore the natural interest rate. However, little is known about the impact of workforce aging on long-term aggregate supply, or so-called potential GDP. To fill this gap, this study delves into the effects of workforce aging on two key components of the remarkably sluggish potential GDP growth of developed countries: hours worked and labour productivity. First, using a novel macro-accounting decomposition of EU-KLEMS data, we find that old-labour input has the highest contribution to growth, through both increased hours worked and shifts in labour composition in the EU, US and Japan. Second, we use panel stochastic frontier models highlighting that, however, old workers have an adverse effect on labour productivity growth frontier – though increasing technical efficiency, i.e., reducing the distance to this frontier.

Keywords: labour productivity and EU-KLEMS; stochastic frontier analysis; labour input; potential growth; demographic aging (search for similar items in EconPapers)
Date: 2025-11-28
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Published in B.E. Journal of Macroeconomics, 2025, 25 (2), pp.553-593. ⟨10.1515/bejm-2024-0114⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05462409

DOI: 10.1515/bejm-2024-0114

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