Ageing and Productivity Growth: Are There Macro-Level Cohort Effects of Human Capital?

44 Pages Posted: 30 Jan 2008

See all articles by Martin Werding

Martin Werding

Ruhr University of Bochum; CESifo (Center for Economic Studies and Ifo Institute); CESifo (Center for Economic Studies and Ifo Institute) - Social Policy and Labour Markets

Date Written: January 2008

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.

Keywords: demographic change, economic growth, total factor productivity, macro-level panel regressions, simulations

JEL Classification: E13, J11, O47, O50

Suggested Citation

Werding, Martin, Ageing and Productivity Growth: Are There Macro-Level Cohort Effects of Human Capital? (January 2008). Available at SSRN: https://ssrn.com/abstract=1088635 or http://dx.doi.org/10.2139/ssrn.1088635

Martin Werding (Contact Author)

Ruhr University of Bochum ( email )

Room GC 04/312
D-44780 Bochum, 44780
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschingerstr. 5
81679 Munich
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Social Policy and Labour Markets ( email )

Munich, 81879
Germany

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