Population Dynamics and Economic Growth: From Demographic Dividend to Demographic Drag?

Rainer Kotschy, National Bureau of Economic Research
David E. Bloom, Harvard University

This paper examines the extent to which changes in working-age shares associated with population aging might slow economic growth in upcoming years. We first analyze the economic effects of changing working-age shares in an empirical growth model using country panel data from 1950--2015. We then juxtapose the estimates with predicted shifts in population age structure to project economic growth in 2020--2050. A key novelty of our approach is the distinction between chronological and functional measures of population age structure. Our results indicate that changes in population age structure will slow economic growth throughout much of the world. However, widely applied chronological measures of population age structure tend to overstate this slowdown as they miss the fact that expansions of labor potential due to improvements in functional capacities among older people can cushion much of this demographic drag.

Keywords: Economic Demography, Population and Development, Population Ageing, Human Capital, Education, and Work

See paper.