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Population aging and comparative advantage

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  • Cai, Jie
  • Stoyanov, Andrey

Abstract

In this paper we show that demographic differences between countries are a source of comparative advantage in international trade. Since many skills are age-dependent, population aging decreases the relative supply and increases the relative price of skills which depreciate with age. Thus, industries relying on skills in which younger workers are relatively more efficient will be more productive in countries with a younger labor force and less productive in countries with an older population. Building upon the neuroscience and economics literature, we construct industry-level measures of intensities in various age-dependent skills and show that population aging leads to specialization in industries which use age-appreciating skills intensively and erodes comparative advantage in industries for which age-depreciating skills are more important.

Suggested Citation

  • Cai, Jie & Stoyanov, Andrey, 2016. "Population aging and comparative advantage," Journal of International Economics, Elsevier, vol. 102(C), pages 1-21.
  • Handle: RePEc:eee:inecon:v:102:y:2016:i:c:p:1-21
    DOI: 10.1016/j.jinteco.2016.04.006
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    More about this item

    Keywords

    Trade patterns; Comparative advantage; Population aging; Age-dependent cognitive skills;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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