Demographic structure, knowledge diffusion, and endogenous productivity growth

Arbeitspapier

This paper considers how increasing longevity and declining birth rates affect market entry and endogenous productivity growth in a two-country model of trade. In each country, the demographic transition to an older population induces a contraction in the labor force through a decline in the working-age population. Firm-level investment in process innovation generates productivity growth, and with imperfect knowledge diffusion the country with the larger labor force has a greater share of firms with higher productivity levels. In this framework, population aging reduces a country's labor supply, share of industry, and relative productivity. If the country with the smaller labor force experiences population aging, knowledge spillovers improve and the rate of productivity growth rises, as the level of market entry falls. Alternatively, population aging in the country with the larger labor force weakens knowledge spillovers and lowers the rate of productivity growth, but has an ambiguous affect on market entry. We show that the effects of population aging may be reversed by extending retirement age, and consider the welfare implications for demographic transition and retirement age extension arising in our framework through a quantitative analysis based on population data for the United States and Western Europe.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1113

Classification and Topics

• Classification: Wirtschaft ; Economic Growth of Open Economies ; Demographic Trends, Macroeconomic Effects, and Forecasts ; Innovation; Research and Development; Technological Change; Intellectual Property Rights: General ; Economic Growth and Aggregate Productivity: General
• Subject: Demographic Structure ; Population Aging ; Knowledge Diffusion ; Industry Location ; Productivity Growth

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Davis, Colin R. ; Hashimoto, Ken-ichi ; Tabata, Ken
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/234925
• Last update: 10.03.2025, 11:43 AM CET