Does Working Age Population Matter for the Impact of Foreign Direct Investment and Credit on Productivity Growth? A Cross-Country Empirical Evidence from ASEAN

Demographic factors remain crucial issues in economic development. The size and age composition of the population greatly affect a country's economic growth. This study aims to investigate the effect of the age dependency ratio on labor productivity through the moderating role of foreign direct investment (FDI) and private sector credit. The study applies the Arellano–Bond Generalized Method of Moments (GMM) using a sample of five selected ASEAN countries over the period 2000–2023. The results reveal that the age dependency ratio weakens the positive effect of foreign direct investment on productivity. Moreover, the age dependency ratio plays a more significant role as a moderating variable than as an independent variable in influencing productivity in ASEAN countries. Policies aimed at increasing productivity among the working-age population (15–64 years) should be a main priority in addressing employment challenges, particularly through improving the quality of education and training and expanding employment opportunities via investment driven by FDI and private sector credit. In addition, birth control efforts through family planning programs and the prevention of early marriage should receive greater attention from governments.