Effects of Population Aging on Economic Growth: A Panel Analysis

Abstract

This paper aims to assess the effects of population aging on economic growth. We adopt the partial-adjustment model to regress the per capita GDP growth rates of 80 countries from 1960 to 2005 against a set of independent variables including the levels and changes in the proportions of the young and elderly population. Unlike the young population, the segment of the elderly population in the total population (or relative to the working-age population) does not indicate a demographic burden and does not inhibit economic growth in the short and long terms. Thus, in many countries, behavior responses to population aging occur in the form of high retirement savings, high labor force participation, and increased immigration of workers from developing countries. Thus, appropriate policies can be implemented to mitigate the adverse consequences of population changes.