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Population Aging and Domestic Investment―An Analysis Using International Panel Data―

Author

Listed:
  • Masanori UMEDA
  • Takuma KAWAMOTO
  • Tetsuro SAKAMAKI
  • Masahiro HORI

Abstract

It has been pointed out that the recovery of domestic investment in Japan has been slow compared to the relatively strong corporate earnings. Similarly sluggish growth in capital investment has been observed in other advanced countries in the process of recovery from the global financial crisis. While the change in the link between macroeconomic developments and investment likely reflects a number of factors, the aging of the population, which are most pronounced in Japan, likely play an important role. To investigate the effects of aging on domestic investment in a country, we run regressions using an international panel dataset covering about 160 countries around the world. As channels through which aging affects domestic investment, we consider two possible channels:（1） a decline in the savings rate, and（ 2） a decline in the expected growth rate. We find that aging leads to lower domestic investment through both channels. Our result appears to suggest that one of the reasons for the sluggish investment observed in a considerable number of countries including Japan is the rapid population aging in countries worldwide. JEL Classification Codes: E21, E22, J11

Suggested Citation

  • Masanori UMEDA & Takuma KAWAMOTO & Tetsuro SAKAMAKI & Masahiro HORI, 2017. "Population Aging and Domestic Investment―An Analysis Using International Panel Data―," Economic Analysis, Economic and Social Research Institute (ESRI), vol. 196, pages 117-133, December.
    • Handle: RePEc:esj:esriea:196f
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    File URL: http://www.esri.go.jp/jp/archive/bun/bun196/bun196f.pdf
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    Citations

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    Cited by:

    1. XU Peng, 2021. "Population Aging and Small Business Exits," Discussion papers 21091, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Population aging; Domestic investment; Saving rate; Expected growth; International panel data;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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