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Can education compensate the effect of population ageing on macroeconomic performance?

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  • Kotschy, Rainer
  • Sunde, Uwe

Abstract

This paper investigates the consequences of population ageing and of changes in the education composition of the population for macroeconomic performance. Estimation results from a theoretically founded empirical framework show that ageing as well as the education composition of the population influence economic performance. The estimates and simulations based on population projections and different counterfactual scenarios show that population ageing will have a substantial negative consequence for macroeconomic performance in many countries in the years to come. The results also suggest that education expansions tend to offset the negative effects, but that the extent to which they compensate the ageing effects differs vastly across countries. The simulations illustrate the heterogeneity in the effects of population ageing on economic performance across countries, depending on their current age and education composition. The estimates provide a method to quantify the increase in education that is required to offset the negative consequences of population ageing. Counterfactual changes in labour force participation and productivity required to neutralise ageing are found to be substantial.

Suggested Citation

  • Kotschy, Rainer & Sunde, Uwe, 2018. "Can education compensate the effect of population ageing on macroeconomic performance?," Munich Reprints in Economics 62876, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:62876
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    Cited by:

    1. Anthony Strittmatter & Uwe Sunde & Dainis Zegners, 2020. "Life cycle patterns of cognitive performance over the long run," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(44), pages 27255-27261, November.
    2. Bloom, David E. & Canning, David & Kotschy, Rainer & Prettner, Klaus & Schünemann, Johannes, 2018. "Health and Economic Growth: Reconciling the Micro and Macro Evidence," IZA Discussion Papers 11940, Institute of Labor Economics (IZA).
    3. David McCollum & Hebe Nicholson & Paula Duffy, 2021. "A place-based approach to population sustainability: Demographic and economic change at the local level in Fife, Scotland," Local Economy, London South Bank University, vol. 36(6), pages 505-523, September.
    4. Paula Prenzel & Simona Iammarino, 2021. "Labor Force Aging and the Composition of Regional Human Capital," Economic Geography, Taylor & Francis Journals, vol. 97(2), pages 140-163, March.
    5. Kotschy, Rainer, 2021. "Health dynamics shape life-cycle incomes," Journal of Health Economics, Elsevier, vol. 75(C).
    6. Klaus Gründler & Niklas Potrafke, 2023. "Population Aging, Retirement, and Aggregate Productivity," CESifo Working Paper Series 10594, CESifo.
    7. Mirela Cristea & Graţiela Georgiana Noja & Cecilia-Nicoleta Jurcuţ & Constantin Ştefan Ponea & Elena Sorina Caragiani & Alin Viorel Istodor, 2021. "The Interplay between Public Health, Well-Being and Population Aging in Europe: An Advanced Structural Equation Modelling and Gaussian Network Approach," IJERPH, MDPI, vol. 18(4), pages 1-20, February.
    8. Mirela S. Cristea & Marilen G. Pirtea & Marta C. Suciu & Gratiela G. Noja & S.S. Askar, 2022. "Workforce Participation, Ageing, and Economic Welfare: New Empirical Evidence on Complex Patterns across the European Union," Complexity, Hindawi, vol. 2022, pages 1-13, January.
    9. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2023. "Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences," IZA Discussion Papers 16500, Institute of Labor Economics (IZA).

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    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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