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Demographic Maturity and Economic Performance: The Effect of Demographic Transitions on Per Capita GDP Growth

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Author Info

  • Rafael Gómez

    () (London School of Economics)

  • Pablo Hernández de Cos

    () (Banco de España)

Abstract

This paper estimates the response of per capita GDP growth to changes in the proportion of mature workers across countries. We define and estimate the effect of demographic maturity in two ways. First, a growing cohort of working age persons (15-64) is found to have a large positive effect on growth of GDP per capita. Second, an increase in the number of prime age workers (35-54) as a fraction of the total working age population (15-64) is found to have a positive but diminishing effect on per capita GDP growth. We find that growth peaks when the ratio of prime age workers over the potentially active population reaches 0.36. Beyond this ratio, diminishing returns set in. Several well known theoretical models of economic growth and labour market performance are consistent with these findings. In particular, the standard life-cycle framework, "Mincerian" earnings equations and personnel economic models of optimal mixes of youth and mature human capital all find confirmation in these estimates.

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File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0318e.pdf
File Function: First version, December 2003
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Bibliographic Info

Paper provided by Banco de España in its series Banco de España Working Papers with number 0318.

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Length: 52 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:bde:wpaper:0318

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For corrections or technical questions regarding this item, or to correct its listing, contact: (María D. González. Electronic Dissemination of Information Unit. Research Department. Banco de España).

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Keywords: growth; demography; age structure;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Chile's Economy - Steady as She Goes
    by CV in alpha.sources.cv on 2010-07-15 15:40:28
  2. Chile's Economy - Steady as she Goes
    by CV in global economy matters on 2010-07-17 10:14:00
  3. Chileâ??s Economy â?? Steady as She Goes
    by Claus Vistesen in credit writedowns on 2010-07-15 18:45:00
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Cited by:
  1. Malmberg, Bo & Lindh, Thomas & Halvarsson, Max, 2005. "Productivity consequences of workforce ageing - Stagnation or a Horndal effect?," Arbetsrapport 2005:17, Institute for Futures Studies.
  2. Rafael Gómez & Pablo Hernández de Cos, 2006. "The importance of being mature: the effect of demographic maturation on global per-capita income," Banco de España Occasional Papers 0604, Banco de España.
  3. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Banco de España Working Papers 0513, Banco de España.
  4. Rafael Gómez & Pablo Hernández de Cos, 2006. "The importance of being mature - the effect of demographic maturation on global per-capita GDP," Working Paper Series 670, European Central Bank.

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