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Ageing and Productivity Growth: Are there Macro-level Cohort Effects of Human Capital?

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  • Martin Werding

Abstract

Slower growth of the labour force and an increase in old-age dependency will reduce the growth of aggregate output and output per capita in many developed countries. However, a major question is whether there is any systematic link between demographics and the productivity of those who will still be active during the up-coming period of demographic ageing. As productivity is difficult to investigate at a micro level, the paper builds on a large macro-data panel covering developed as well as developing countries and explores the impact of the age composition of the labour force on levels and growth rates of output per worker as well as on total factor productivity (TFP). The results confirm earlier findings by Feyrer (2007), pointing to an inversely U-shaped relationship between the share of workers in different age groups and productivity which mainly works through the TFP channel and is effectively much stronger than what can be observed at a micro level. In-depths analyses suggest that cohort effects in human-capital accumulation may contribute to this pattern, but do not explain it. The paper concludes with simulations for a number of OECD countries showing that the impact of projected ageing of the labour force on productivity and per-capita growth could be really substantial in some cases.

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  • Martin Werding, 2008. "Ageing and Productivity Growth: Are there Macro-level Cohort Effects of Human Capital?," CESifo Working Paper Series 2207, CESifo.
    • Handle: RePEc:ces:ceswps:_2207
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    Cited by:

    1. Braun, Sebastian & Friedl, Andreas & Groll, Dominik & Bachmann, Ronald & Giesecke, Matthias & Kramer, Anica & Paloyo, Alfredo & Sachs, Andreas, 2012. "Demografie und Wachstum: Die gesamtwirtschaftlichen Effekte einer höheren Erwerbstätigkeit Älterer. Gutachten im Auftrag der Initiative Neue Soziale Marktwirtschaft (INSM) GmbH. Endbericht," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72614.
    2. Richter, Doreen, 2014. "Demographic change and innovation: The ongoing challenge from the diversity of the labor force," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 25(3), pages 166-184.
    3. Cylus, Jonathan & Al Tayara, Lynn, 2021. "Health, an ageing labour force, and the economy: does health moderate the relationship between population age-structure and economic growth?," LSE Research Online Documents on Economics 112421, London School of Economics and Political Science, LSE Library.
    4. Christine Mayrhuber & Gerhard Rünstler & Thomas Url & Werner Eichhorst & Michael J. Kendzia & Maarten Gerard & Connie Nielsen, 2011. "Pension Systems in the EU. Contingent Liabilities and Assets in the Public and Private Sector," WIFO Studies, WIFO, number 43938, April.
    5. Roel van Elk & Marc van der Steeg & Dinand Webbink, 2013. "The effects of a special program for multi-problem school dropouts on educational enrolment, employment and criminal behaviour; Evidence from a field experiment," CPB Discussion Paper 241.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Mr. Shekhar Aiyar & Mr. Christian H Ebeke, 2016. "The Impact of Workforce Aging on European Productivity," IMF Working Papers 2016/238, International Monetary Fund.
    7. J. Muysken & T. H. W. Ziesemer, 2013. "A permanent effect of temporary immigration on economic growth," Applied Economics, Taylor & Francis Journals, vol. 45(28), pages 4050-4059, October.
    8. Boss, Alfred & Dovern, Jonas & Gern, Klaus-Jürgen & Jannsen, Nils & Meier, Carsten-Patrick & van Roye, Björn & Scheide, Joachim, 2009. "Ursachen der Wachstumsschwäche in Deutschland 1995-2005," Open Access Publications from Kiel Institute for the World Economy 32859, Kiel Institute for the World Economy (IfW Kiel).
    9. Lorenzo Burlon & Montserrat Vilalta-Buf�, 2014. "Technical progress, retraining cost and early retirement," Temi di discussione (Economic working papers) 963, Bank of Italy, Economic Research and International Relations Area.
    10. Christine Mayrhuber & Silvia Rocha-Akis, 2013. "Anreizsysteme zur Weiterbeschäftigung älterer Arbeitnehmerinnen und Arbeitnehmer," WIFO Studies, WIFO, number 46905, April.
    11. Ross Guest, 2014. "Population ageing and productivity: A survey with implications for New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(2), pages 153-168, August.
    12. Richter, Doreen, 2014. "Demographic change and innovation: The ongoing challenge from the diversity of the labor force," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 25(3), pages 166-184.
    13. Cylus, Jonathan & Al Tayara, Lynn, 2021. "Health, an ageing labour force, and the economy: Does health moderate the relationship between population age-structure and economic growth?," Social Science & Medicine, Elsevier, vol. 287(C).
    14. Pavel Breinek, 2018. "Problems of Older Workers on the Labour Market," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(4), pages 1073-1084.
    15. Ross Guest, 2013. "Population Ageing and Productivity: Implications and Policy Options for New Zealand," Treasury Working Paper Series 13/21, New Zealand Treasury.
    16. R. Schoonackers & F. Heylen, 2011. "Fiscal Policy and TFP in the OECD: A Non-Stationary Panel Approach," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/701, Ghent University, Faculty of Economics and Business Administration.
    17. Muysken, Joan & Ziesemer, Thomas, 2011. "Immigration and growth in an ageing economy - version 2," MERIT Working Papers 2011-037, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Felix Hüfner & Caroline Klein, 2012. "The German Labour Market: Preparing for the Future," OECD Economics Department Working Papers 983, OECD Publishing.
    19. Christine Mayrhuber & Hedwig Lutz & Ingrid Mairhuber, 2021. "Erwerbsaustritt, Pensionsantritt und Anhebung des Frauenpensionsantrittsalters ab 2024. Potentielle Auswirkungen auf Frauen, Branchen und Betriebe," WIFO Studies, WIFO, number 67348, April.
    20. Hervé Boulhol & Laure Turner, 2009. "Employment-Productivity Trade-off and Labour Composition," OECD Economics Department Working Papers 698, OECD Publishing.
    21. Karsten Wasiluk, 2014. "Technology Adoption and Demographic Change," Working Paper Series of the Department of Economics, University of Konstanz 2014-05, Department of Economics, University of Konstanz.

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    More about this item

    Keywords

    demographic change; economic growth; total factor productivity; macro-level panel regressions; simulations;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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