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Age Dependency and Labor Productivity Divergence

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  • Misbah Tanveer Choudhry
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    Abstract

    This study finds strong empirical evidence in favor of the hypothesis that age composition of population matters for labor productivity growth. We applied the fixed effects panel model using data of large number of countries over the period 1980-2005. Our results suggest that higher age dependency impacts the labor productivity negatively not only directly but also modifies the impact of other determinants of labor productivity. Child dependency has more adverse effect on labor productivity as compared to old age dependency. We specifically find that marginal effect of gross capital formation, labor market reforms and information and communication technology investment on labor productivity is high and significant at lower level of age dependency. However, the marginal effect of financial development on labor productivity increases at high level of age dependency in developing economies. Diversity in size and nature of age dependency across regions and different income groups helps to explain labor productivity differential across them.

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    Bibliographic Info

    Paper provided by Università di Perugia, Dipartimento Economia, Finanza e Statistica in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 113/2013.

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    Length: 40 pages
    Date of creation: 02 Jan 2013
    Date of revision:
    Handle: RePEc:pia:wpaper:113/2013

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    Keywords: labour productivity growth; Age dependency; panel fixed effects;

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    1. Dale W. Jorgenson & Khuong Vu, 2007. "Information Technology and the World Growth Resurgence," German Economic Review, Verein für Socialpolitik, vol. 8, pages 125-145, 05.
    2. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
    3. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers 660, Stockholm University, Institute for International Economic Studies.
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    7. Michael Sarel, 1995. "Demographic Dynamics and the Empirics of Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 398-410, June.
    8. Ilmakunnas, Pekka & Maliranta, Mika, 2003. "Technology, Labor Characteristic and Wage-productivity Gaps," Discussion Papers 860, The Research Institute of the Finnish Economy.
    9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
    10. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report 242, Federal Reserve Bank of Minneapolis.
    11. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
    12. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
    13. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
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