Working Paper: NBER ID: w24902
Authors: Gauti B. Eggertsson; Manuel Lancastre; Lawrence H. Summers
Abstract: This paper re-examines the relationship between population aging and economic growth. We confirm previous research such as Cutler, Poterba, Sheiner, and Summers (1990) and Acemoglu and Restrepo (2017) that show positive correlation between measures of population aging and per-capita output growth. Our contribution is demonstrating that this relationship breaks down when the adjustment of interest rates is inhibited by an effective lower bound on nominal rates as took place during the Great Financial Crisis decade. Indeed, during the “secular stagnation regime” of 2008-2015 that prevailed in a number of countries, aging had a negative impact on living standards, consistent with the secular stagnation hypothesis.
Keywords: population aging; economic growth; secular stagnation; real interest rates; capital deepening
JEL Codes: E0; E31; E32; E5; E58; O4; O42; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ZLB (E62) | Prevents real interest rate decline (E43) |
| Population aging (J11) | Per capita output growth (pre-2008) (O49) |
| Population aging (J11) | Capital deepening (E22) |
| Capital deepening (E22) | Total factor productivity (TFP) (pre-2008) (O49) |
| ZLB (E62) | Negative impact on capital accumulation (post-2008) (F65) |
| Negative impact on capital accumulation (post-2008) (F65) | Output growth (post-2008) (O49) |
| Population aging (J11) | Output growth (post-2008) (O49) |