Ageing, Productivity and Economic Growth: A Macro-level Analysis

Martin Werding

No 338, PIE/CIS Discussion Paper from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: Slower growth, or even a decline, of the labour force and an increase in old-age dependency will slow down the growth of aggregrate output and output per capita in many developed countries. However, a major question is whether there is any systematic link between demographics and the productivity of those who will still be active during the up-coming period of demographic ageing. As productivity is difficult to investigate at a micro level, the paper builds on a large macro-data panel covering developed as well as developing countries and explores the impact of the age composition of the labour force on levels and growth rates of output per worker as well as on total factor productivity (TFP). The results point to an inversely U-shaped relationship between the share of workers in different age groups and productivity which works mainly through the TFP channel and is effectively much stronger than what can be observed at a micro level. In-depths analyses suggest that cohort effects in human-capital accumulation may contribute to this pattern, but do not explain it The paper concludes with simulations for a number of OECD countries showing that the impact of projected ageing of the labour force on productivity and per-capita growth could be really substantial in some cases.

Keywords: Demographic change; economic growth; total factor productivity; macro-level panel regressions; simulations (search for similar items in EconPapers)
JEL-codes: E13 J1 O4 O50 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2007-10
Note: October 2007
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Persistent link: https://EconPapers.repec.org/RePEc:hit:piecis:338

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