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The Impact of Demographics on Productivity and Inflation in Japan

Niklas Westelius () and Yihan Liu

No 16/237, IMF Working Papers from International Monetary Fund

Abstract: Is Japan’s aging and, more recently, declining population hampering growth and reflation efforts? Exploiting demographic and economic variation in prefectural data between 1990 and 2007, we find that aging of the working age population has had a significant negative impact on total factor productivity. Moreover, prefectures that aged at a faster pace experienced lower overall inflation, while prefectures with higher population growth experienced higher inflation. The results give strong support to the notion that demographic headwinds can have a non-trivial impact on total factor productivity and deflationary pressures.

Keywords: Total factor productivity; Population growth; Demographic transition; Inflation; Japan; Asia and Pacific; Aging; and Productivity, Productivity, Demographic Trends and Forecasts, General (search for similar items in EconPapers)
Pages: 18
Date: 2016-12-08
New Economics Papers: this item is included in nep-age
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