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Demographic structure, knowledge diffusion, and endogenous productivity growth

Author

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  • Davis, Colin
  • Hashimoto, Ken-ichi
  • Tabata, Ken

Abstract

This paper considers how increasing longevity and declining birth rates affect market entry and endogenous productivity growth in a two-country model of industry location and trade. Firm-level investment in process innovation generates productivity growth, and with imperfect knowledge diffusion the larger country, measured by labor force size, has a greater share of relatively productive firms. In this framework, population aging reduces a country’s labor supply, share of industry, and relative productivity. If the smaller country 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 larger country weakens knowledge spillovers and lowers the rate of productivity growth, but has an ambiguous affect on market entry. A quantitative analysis of the framework based on population data for the United States and Western Europe is used to consider the welfare implications of demographic transition.

Suggested Citation

  • Davis, Colin & Hashimoto, Ken-ichi & Tabata, Ken, 2022. "Demographic structure, knowledge diffusion, and endogenous productivity growth," Journal of Macroeconomics, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:jmacro:v:71:y:2022:i:c:s0164070421000926
    DOI: 10.1016/j.jmacro.2021.103396
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    2. Wenqun Gao & Yang Chen & Shaorui Xu & Oleksii Lyulyov & Tetyana Pimonenko, 2023. "The Role of Population Aging in High-Quality Economic Development: Mediating Role of Technological Innovation," SAGE Open, , vol. 13(4), pages 21582440231, October.

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    More about this item

    Keywords

    Demographic structure; Population aging; Retirement age extension; Knowledge diffusion; Industry location; Productivity growth;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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