Working Paper: CEPR ID: DP18621
Authors: Jess Fernández-Villaverde; Gustavo Ventura; Wen Yao
Abstract: Due to population aging, GDP growth per capita and GDP growth per working-age adult have become quite different among many advanced economies over the last several decades. Countries whose GDP growth per capita performance has been lackluster, like Japan, have done surprisingly well in terms of GDP growth per working-age adult. Indeed, from 1998 to 2019, Japan has grown slightly faster than the U.S. in terms of per working-age adult: an accumulated 31.9% vs. 29.5%. Furthermore, many advanced economies appear to be on parallel balanced growth trajectories in terms of working-age adults despite important differences in levels. Motivated by this observation, we calibrate a standard neoclassical growth model in which the growth of the working-age adult population varies in line with the data for each economy. Despite the underlying demographic differences, the calibrated model tracks output per working-age adult in most economies of our sample. Our results imply that the growth behavior of mature, aging economies is not puzzling from a theoretical perspective.
Keywords: demographics; growth; developed economies
JEL Codes: E20; J10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Demographic changes (J11) | GDP growth per working-age adult (O49) |
| Growth of the working-age adult population (J11) | GDP growth per working-age adult (O49) |
| Decline in Japan's working-age population (J11) | Lower total GDP growth (F62) |
| Japan's GDP growth per working-age adult (O49) | US GDP growth per working-age adult (O49) |
| Calibrated model (C51) | Output per working-age adult (J39) |
| Output per working-age adult (J39) | Economic performance in aging populations (J14) |