۱- Introduction

۲- Empirical specification

۳- Empirical results

۴- Summary and concluding remarks

References

Abstract

Using panel data for 142 countries for the period from 1960 to 2014, we assess the effects of population aging on economic growth. We find that population aging proxied by old-age population share (or old-age dependency ratio) negatively affects economic growth only when it reaches a certain high level and its negative effects grow stronger as population aging deepens. The nonlinear relationship between population aging and economic growth is associated with the historical nonlinear relationship between the shares of old and working-age population. In the early stages of a demographic shift in most countries, as the old-age population share increases, the working-age population share also tends to increase. Only when the share of old-age population is sufficiently high, the increase in the share of old-age population has coincided with the decline in the share of working age population, thereby having a negative relationship with economic growth. These results can clarify why some previous papers failed to uncover a negative relationship between aging population and economic growth. We also find that population aging has hampered economic growth during more recent years, especially in more aged countries which are mostly developed countries.

Introduction

During the past few decades, most countries have experienced rapid changes in the age structure of their populations. For example, many East Asian countries have experienced a rapid shift in their age structure from a high youth-age population share to a high working-age population share and then to a high old-age population share. A rapid increase in working-age population share occurred in these countries during the 1970s and 1980s and this transition contributed substantially to East Asia’s so-called economic miracle (Bloom and Williamson, 1998). Such a period of demographic dividend did not last long, however. These countries in Asia are now experiencing population aging at a rate higher than in any other regions. As compared to medium-age workers (more generally, the workingage population), the elderly participate less actively in the labor force, their productivities are lower (Skirbekk, 2003; Aiyar et al., 2016; Liu and Westelius, 2016), and they save less (Park and Shin, 2012; Horioka and Niimi, 2017). Thus, if a number of people in the working-age population are replaced by an equivalent number among the old-age population, other things being equal, then population aging in a country will hamper its economic growth, thus imposing a significant demographic burden.1 However, previous empirical studies examining the overall impact of population aging on economic growth have often yielded mixed results, as reviewed in Nagarajan et al. (2013). For example, using a panel dataset for the period 1960–۲۰۰۵, Bloom et al., 2008aBloom et al., (2008a, 2008b) find that the effect of old age on growth is negative in the short run but insignificant in the long run. Similarly, using the partial adjustment model in a panel framework and a dataset for 80 countries for the period 1960–۲۰۰۵, Lee et al. (2013) find that population aging does not appear to hold back economic growth. More recently, Acemoglu and Restrepo (2017) argue that countries experiencing more rapid aging have grown more rapidly because of the more rapid adoption of automation technologies in these countries.