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Demographic Maturity and Economic Performance: The Effect of Demographic Transitions on Per Capita GDP Growth

  • Rafael Gómez

    ()

    (London School of Economics)

  • Pablo Hernández de Cos

    ()

    (Banco de España)

This paper estimates the response of per capita GDP growth to changes in the proportion of mature workers across countries. We define and estimate the effect of demographic maturity in two ways. First, a growing cohort of working age persons (15-64) is found to have a large positive effect on growth of GDP per capita. Second, an increase in the number of prime age workers (35-54) as a fraction of the total working age population (15-64) is found to have a positive but diminishing effect on per capita GDP growth. We find that growth peaks when the ratio of prime age workers over the potentially active population reaches 0.36. Beyond this ratio, diminishing returns set in. Several well known theoretical models of economic growth and labour market performance are consistent with these findings. In particular, the standard life-cycle framework, "Mincerian" earnings equations and personnel economic models of optimal mixes of youth and mature human capital all find confirmation in these estimates.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0318e.pdf
File Function: First version, December 2003
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0318.

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Length: 52 pages
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:bde:wpaper:0318
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