Workforce Ageing and Labour Productivity Dynamics

Ana Milanez


This paper adopts a neoclassical framework to study the effect of age composition
of the working-age population on labour productivity and its determinants,
based on an unbalanced panel of 64 non-oil-producing countries, over the period
1950-2017. Our first contribution comes from testing whether a shock in age
structure has the ability to permanently shift labour productivity dynamics. From
methodological standpoint, we try to reduce the risk of model mispecification in
the existing literature, that has often overlooked the possibility of cross-sectional
dependence in the data and heterogeneity in slope coefficients. We also note the
importance of time series properties of the data for valid statistical inference.
Our results indicate, that ageing of the working-age population depresses labour
productivity growth; negative impact of individuals aged between 55 and 64
on total factor productivity growth is only partially offset by its positive impact
on human and physical capital accumulation. For sustaining the current level
of living standards, adoption of policies, which forestall the negative impact of
older workers on innovation process and promote their positive impact on the
supply of production factors, is of crucial importance. We do not find evidence,
that higher public spending on education in% of GDP has such an effect.


labour productivity, demographics, neoclassical production function, panel data

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