The Comparative Advantage of Age

Joseph Kopecky ()
Additional contact information
Joseph Kopecky: Department of Economics, Trinity College Dublin

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

Abstract: I develop a quantitative multi‐country, multi‐sector trade model in which population age structure shapes comparative advantage through age‐dependent skills. Workers of different ages supply heterogeneous bundles of cognitive and physical abilities that appreciate or depreciate over the life cycle, and sectors use these skills with differing intensities. I embed this mechanism into a Ricardian trade model calibrated to 30 countries and 20 manufacturing sectors. Reduced‐form evidence from a panel of 204 countries (1995‐2024) documents a 'grey advantage': a country's share of older workers is associated with a shift in its export mix toward appreciating‐skill‐intensive sectors. Evaluated in partial equilibrium, the calibrated model recovers 84% of this empirical relationship. General equilibrium adjustment then compresses the trade composition response by a factor of ten, as endogenous wage and price changes absorb the sectoral reallocation but generate welfare‐relevant real-income effects. Forward projections decompose the total demographic effect into a workforce‐size channel (shrinking populations produce less) and a skill‐composition channel (aging shifts the mix of skills, altering sectoral comparative advantage). The composition channel generates welfare effects ranging from ‐0.9% to +0.05%, comparable to standard trade‐policy shocks, and exhibits a striking temporal pattern. Historical demographic divergence supported positive composition gains, but as countries' age structures converge toward a common older profile, these gains are reversing. Bilateral trade flows reallocate accordingly, with the model projecting that China‐US trade will fall by 10% and India‐US trade will rise by 34% in the coming decades.

Keywords: Comparative advantage; Population aging; Trade; Demographics; Ricardian model (search for similar items in EconPapers)
JEL-codes: F11 F14 F17 J11 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2026-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.tcd.ie/Economics/TEP/2026/TEP0726.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0726

Access Statistics for this paper

More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().