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Age diversity and aggregate productivity

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  • Balázs Zélity

    (Wesleyan University)

Abstract

This research explores theoretically, empirically, and quantitatively the role of age diversity in determining aggregate productivity and output. Age diversity has two conflicting effects on output. On the one hand, due to the complementarity between education and experience, age diversity may be beneficial. On the other hand, rapid skill-biased technological change makes age diversity costly as up-to-date education tends to be concentrated among younger cohorts. To study this trade-off, I first build an overlapping-generations (OLG) model which, in view of these two opposing forces, predicts a hump-shaped relationship between age diversity and GDP per capita. This prediction is established analytically, and also quantitatively using real-world population data in an extended computational version of the model. The prediction is then tested using country-level panel data with a novel instrument and regional data from Europe. Moving one standard deviation closer to the optimal level of age diversity is associated with a 1.5% increase in GDP per capita.

Suggested Citation

  • Balázs Zélity, 2023. "Age diversity and aggregate productivity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(3), pages 1863-1899, July.
  • Handle: RePEc:spr:jopoec:v:36:y:2023:i:3:d:10.1007_s00148-022-00911-3
    DOI: 10.1007/s00148-022-00911-3
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    More about this item

    Keywords

    Age diversity; Education; Experience; Human capital; Demographics; Skill-biased technological change;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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