Population Aging and the Realignment of World Trade

Joseph Kopecky

No tep0726, Economic Papers from Trinity College Dublin, Economics Department

Abstract: The world’s workforces are aging, some faster than others. I quantify how this divergence realigns the pattern of world trade, in a multi country, multi-sector Ricardian model in which workers of different ages supply different skills. Aging moves trade in two ways. Diverging workforce sizes move its volume: countries with more workers produce and export more. The changing skill mix moves its composition: as a workforce ages, the sectors a country is good at shift, and so does what it exports. By 2050 demographics alone lower China’s exports to the United States by 9% while raising India’s by 33%. For the world’s largest trading partners, a decades-long demographic tailwind that promoted trade integration is now reversing, even as it keeps building for younger exporters. This paper estimates the scale of that reversal and traces the compositional shift underneath it, as trade moves out of the sectors that lean on the young and into those that use older workers. Aging also moves the external balance, turning the advanced and East Asian economies into net creditors and the young into debtors, broadly matching observed net foreign asset positions, and leaving the corridor results intact. The welfare effects of these flows are largely offsetting. The goods a fast-aging country buys grow more expensive as the services it makes grow cheaper. Much larger welfare effects arise from demographic change, but fall on domestic margins.

Keywords: Comparative advantage; Population aging; Trade; Demographics; Ricardian model (search for similar items in EconPapers)
JEL-codes: F11 F17 J11 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2026-04, Revised 2026-07
New Economics Papers: this item is included in nep-age, nep-cna and nep-int
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