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Nonlinear effects of population aging on economic growth

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  • Lee, Hyun-Hoon
  • Shin, Kwanho

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.

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  • Lee, Hyun-Hoon & Shin, Kwanho, 2019. "Nonlinear effects of population aging on economic growth," Japan and the World Economy, Elsevier, vol. 51(C), pages 1-1.
    • Handle: RePEc:eee:japwor:v:51:y:2019:i:c:3
    DOI: 10.1016/j.japwor.2019.100963
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      More about this item

      Keywords

      Population aging; Non-linear effects; Economic growth;
      All these keywords.

      JEL classification:

      • 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
      • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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