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Skills, Population Aging, and the Pattern of Trade

Ke Gu and Andrey Stoyanov ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we investigate a particular mechanism through which differences in demographic composition across countries affect international trade flows. Some cognitive functions are known to vary across the adult life span, and in particular the ability to update skills and adapt to changes in working conditions. As a country's population is getting older, it becomes increasingly difficult for firms to find workers with up-to-date skills. As a result, countries with aging populations will start losing comparative advantage in industries that rely heavily on workers' ability to adapt to frequent changes in working conditions. We test this hypothesis and find robust empirical evidence for a significant negative effect of population aging on comparative advantage of a country in industries which are intensive in skill adaptability of the labor force, in both the cross-sectional and the dynamic panel data sets.

Keywords: worker adaptability; comparative advantage; population aging (search for similar items in EconPapers)
JEL-codes: F14 F16 J11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dem and nep-int
Date: 2018-01-31
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