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The effect of aging on entrepreneurship and aggregate productivity

Author

Listed:
  • Hoshi, Takeo
  • Kodama, Naomi
  • Li, Huiyu

Abstract

Using firm-level data in Japan, this paper documents hump-shaped relationships between (1) the propensity to be entrepreneurs and individuals’ age, and (2) firm sales and sales per worker with entrepreneurs’ age. We examine these patterns using a general equilibrium model in which aging of the population affects total factor productivity (TFP) through selection into entrepreneurship. We use the model to project changes in output per capita as the population ages according to the official projections of the Japanese government. Over the next three decades, aging can lower TFP and hence output per capita through the selection of entrepreneurs, but the effect is quantitatively small.

Suggested Citation

  • Hoshi, Takeo & Kodama, Naomi & Li, Huiyu, 2025. "The effect of aging on entrepreneurship and aggregate productivity," The Journal of the Economics of Ageing, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:joecag:v:32:y:2025:i:c:s2212828x2500060x
    DOI: 10.1016/j.jeoa.2025.100605
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    References listed on IDEAS

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    Cited by:

    1. Chen, Fang & Liu, Wenge, 2025. "Aging workforce and industrial Robots: Industry-Level evidence from Japan," The Journal of the Economics of Ageing, Elsevier, vol. 32(C).
    2. Mori, Tomoya, 2026. "Demography in disguise: Comments on "Demographic challenges and economic stagnation in Japan" by Takeo Hoshi (2026)," MPRA Paper 128962, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • J1 - Labor and Demographic Economics - - Demographic Economics

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