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Age Dependency and Labor Productivity Divergence

  • Misbah Tanveer Choudhry
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    This study finds strong empirical evidence in favor of the hypothesis that age composition of population matters for labor productivity growth. We applied the fixed effects panel model using data of large number of countries over the period 1980-2005. Our results suggest that higher age dependency impacts the labor productivity negatively not only directly but also modifies the impact of other determinants of labor productivity. Child dependency has more adverse effect on labor productivity as compared to old age dependency. We specifically find that marginal effect of gross capital formation, labor market reforms and information and communication technology investment on labor productivity is high and significant at lower level of age dependency. However, the marginal effect of financial development on labor productivity increases at high level of age dependency in developing economies. Diversity in size and nature of age dependency across regions and different income groups helps to explain labor productivity differential across them.

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    Paper provided by Università di Perugia, Dipartimento Economia in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 113/2013.

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    Length: 40 pages
    Date of creation: 02 Jan 2013
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    Handle: RePEc:pia:wpaper:113/2013
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    1. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    2. Bourles, Renaud & Cette, Gilbert, 2007. "Trends in "structural" productivity levels in the major industrialized countries," Economics Letters, Elsevier, vol. 95(1), pages 151-156, April.
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    5. Kogel, Tomas, 2005. "Youth dependency and total factor productivity," Journal of Development Economics, Elsevier, vol. 76(1), pages 147-173, February.
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    8. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
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    11. Ilmakunnas, Pekka & Maliranta, Mika, 2003. "Technology, Labor Characteristic and Wage-productivity Gaps," Discussion Papers 860, The Research Institute of the Finnish Economy.
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    15. Michael Sarel, 1995. "Demographic Dynamics and the Empirics of Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 398-410, June.
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