The effects of demographic dynamics on economic growth in EU economies: A panel vector autoregressive approach

Hiroyuki Taguchi () and Mirani Latjin

MPRA Paper from University Library of Munich, Germany

Abstract: This study estimates the effects of demographic dynamics on economic growth, with a focus on the working-age population and life expectancy in 19 European Union economies for 1970–2020 and 2020–2050, using a panel vector autoregressive (PVAR) model as the analytical methodology. The main findings are as follows. First, the PVAR estimation identifies positive effects of the growth of the working-age population share and the extension of life expectancy on economic growth. Second, the contribution ratio of the demographic effects to economic growth for past population bonus periods is approximately 15% on average in this study, which is comparable to the ratios found in previous studies. Third, the projection for 2020–2050 shows that the magnitude of the negative demographic effect on annual economic growth due to the population onus is -0.385 on average among all sample economies. The main policy implication of this study is that the EU economies that have already entered the population onus phase of the demographic transition need to mitigate the negative effects of the decline in the working-age population share.

Keywords: demographic dynamics; economic growth; European Union; working-age population; life expectancy; panel vector autoregressive model (search for similar items in EconPapers)
JEL-codes: J11 O52 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-age and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113596

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