IDEAS home Printed from https://ideas.repec.org/a/wsi/jicepx/v08y2017i02ns1793993317500089.html
   My bibliography  Save this article

The Impact of Demographics on Productivity and Inflation in Japan

Author

Listed:
  • Yihan Liu

    (International Monetary Fund, 700 19th Street, NW, Washington, DC, USA)

  • Niklas Westelius

    (International Monetary Fund, 700 19th Street, NW, Washington, DC, USA)

Abstract

Is Japan’s aging and, more recently, declining population hampering its growth and reflation efforts? Exploiting the demographic and economic variation in the prefectural data between 1990 and 2007, we find that aging of the working age population has had a significant negative impact on the total factor productivity (TFP). Moreover, prefectures that aged at a faster pace experienced lower overall inflation, while prefectures with higher population growth experienced higher inflation. The results give strong support to the notion that demographic headwinds can have a non-trivial impact on the TFP and deflationary pressures.

Suggested Citation

  • Yihan Liu & Niklas Westelius, 2017. "The Impact of Demographics on Productivity and Inflation in Japan," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-16, June.
    • Handle: RePEc:wsi:jicepx:v:08:y:2017:i:02:n:s1793993317500089
    DOI: 10.1142/S1793993317500089
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1793993317500089
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S1793993317500089?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    2. FUKAO Kyoji & MAKINO Tatsuji & TOKUI Joji, 2015. "Regional Factor Inputs and Convergence in Japan: A macro-level analysis, 1955-2008," Discussion papers 15123, Research Institute of Economy, Trade and Industry (RIETI).
    3. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
    4. James B. Bullard & Carlos Garriga & Christopher J. Waller, 2012. "Demographics, redistribution, and optimal inflation," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 419-440.
    5. Yoon, Jong-Won & Kim, Jinill & Lee, Jungjin, 2018. "Impact of Demographic Changes on Inflation and the Macroeconomy," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 40(1), pages 1-30.
    6. Nicole Maestas & Kathleen Mullen & David Powell, 2014. "The Effect of Population Aging on Economic Growth," Discussion Papers 14-012, Stanford Institute for Economic Policy Research.
    7. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    8. Nicole Maestas & Kathleen J. Mullen & David Powell, 2023. "The Effect of Population Aging on Economic Growth, the Labor Force, and Productivity," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 306-332, April.
    9. Mr. Shekhar Aiyar & Mr. Christian H Ebeke, 2016. "The Impact of Workforce Aging on European Productivity," IMF Working Papers 2016/238, International Monetary Fund.
    10. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
    11. Etienne Gagnon & Benjamin K. Johannsen & David López-Salido, 2021. "Understanding the New Normal: The Role of Demographics," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(2), pages 357-390, June.
    12. Benjamin F. Jones, 2010. "Age and Great Invention," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 1-14, February.
    13. Mr. Derek Anderson & Mr. Dennis P Botman & Mr. Benjamin L Hunt, 2014. "Is Japan’s Population Aging Deflationary?," IMF Working Papers 2014/139, International Monetary Fund.
    14. Mikael Juselius & Elod Takats, 2015. "Can demography affect inflation and monetary policy?," BIS Working Papers 485, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lee, Hyun-Hoon & Shin, Kwanho, 2019. "Nonlinear effects of population aging on economic growth," Japan and the World Economy, Elsevier, vol. 51(C), pages 1-1.
    2. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    3. Mr. Fei Han, 2019. "Demographics and the Natural Rate of Interest in Japan," IMF Working Papers 2019/031, International Monetary Fund.
    4. Xiaoxi Wang & Yaojun Zhang & Danlin Yu & Xiwei Wu & Ding Li, 2022. "Changes in Demographic Factors’ Influence on Regional Productivity Growth: Empirical Evidence from China, 2000–2010," Sustainability, MDPI, vol. 14(7), pages 1-19, April.
    5. Shabir, Mohsin & Jiang, Ping & Bakhsh, Satar & Zhao, Zhongxiu, 2021. "Economic policy uncertainty and bank stability: Threshold effect of institutional quality and competition," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    6. Barbiellini Amidei, Federico & Gomellini, Matteo & Piselli, Paolo, 2019. "The price of demography," MPRA Paper 94435, University Library of Munich, Germany.
    7. Bodnár, Katalin & Nerlich, Carolin, 2022. "The macroeconomic and fiscal impact of population ageing," Occasional Paper Series 296, European Central Bank.
    8. MONGELLI Ignazio & CISCAR MARTINEZ Juan Carlos, 2018. "Economic consequences of zero international migration in the EU: An assessment for Europe based on the Eurostat population projections," JRC Research Reports JRC109196, Joint Research Centre.
    9. Tomoki Isa, 2021. "Demographic Effects on Prices: Is Aging Deflationary?," Discussion papers ron342, Policy Research Institute, Ministry of Finance Japan.
    10. Cylus, Jonathan & Al Tayara, Lynn, 2021. "Health, an ageing labour force, and the economy: Does health moderate the relationship between population age-structure and economic growth?," Social Science & Medicine, Elsevier, vol. 287(C).
    11. Thomas Mayer & Gunther Schnabl, 2022. "Japan's Low Inflation Conundrum," CESifo Working Paper Series 9821, CESifo.
    12. Iñigo Calvo-Sotomayor & Ekhi Atutxa & Ricardo Aguado, 2020. "Who Is Afraid of Population Aging? Myths, Challenges and an Open Question from the Civil Economy Perspective," IJERPH, MDPI, vol. 17(15), pages 1-17, July.
    13. Iñigo Calvo-Sotomayor & Jon Paul Laka & Ricardo Aguado, 2019. "Workforce Ageing and Labour Productivity in Europe," Sustainability, MDPI, vol. 11(20), pages 1-16, October.
    14. Joseph Junior Aduba & Behrooz Asgari, 2020. "Productivity and technological progress of the Japanese manufacturing industries, 2000–2014: estimation with data envelopment analysis and log-linear learning model," Asia-Pacific Journal of Regional Science, Springer, vol. 4(2), pages 343-387, June.
    15. Cylus, Jonathan & Al Tayara, Lynn, 2021. "Health, an ageing labour force, and the economy: does health moderate the relationship between population age-structure and economic growth?," LSE Research Online Documents on Economics 112421, London School of Economics and Political Science, LSE Library.
    16. Han, Fei, 2024. "The impact of demographic change on the natural rate of interest in Japan," Japan and the World Economy, Elsevier, vol. 69(C).
    17. Miguel Benítez Rueda, 2022. "Migración venezolana y productividad laboral en Colombia," Coyuntura Económica, Fedesarrollo, vol. 52, pages 35-64, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barbiellini Amidei, Federico & Gomellini, Matteo & Piselli, Paolo, 2019. "The price of demography," MPRA Paper 94435, University Library of Munich, Germany.
    2. Juselius, Mikael & Takáts, Előd, 2021. "Inflation and demography through time," Journal of Economic Dynamics and Control, Elsevier, vol. 128(C).
    3. Goh, Soo Khoon & McNown, Robert & Wong, Koi Nyen, 2020. "Macroeconomic implications of population aging: Evidence from Japan," Journal of Asian Economics, Elsevier, vol. 68(C).
    4. Fedotenkov, Igor, 2018. "Population ageing and inflation with endogenous money creation," Research in Economics, Elsevier, vol. 72(3), pages 392-403.
    5. Rainer Kotschy & Uwe Sunde & Tommaso MonacelliManaging Editor, 2018. "Can education compensate the effect of population ageing on macroeconomic performance?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(96), pages 587-634.
    6. Allen, Steven G., 2023. "Demand for older workers: What do we know? What do we need to learn?," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    7. Philipp F. M. Baumann & Enzo Rossi & Alexander Volkmann, 2020. "What Drives Inflation and How: Evidence from Additive Mixed Models Selected by cAIC," Papers 2006.06274, arXiv.org, revised Aug 2022.
    8. Dantas Guimarães, Silvana & Ferreira Tiryaki, Gisele, 2020. "The impact of population aging on business cycles volatility: International evidence," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    9. Darya Antonova & Yulia Vymyatnina, 2018. "Inflation and Population Age Structure: The Case of Emerging Economies," Russian Journal of Money and Finance, Bank of Russia, vol. 77(4), pages 3-25, December.
    10. Giuseppe Ferrero & Marco Gross & Stefano Neri, 2019. "On secular stagnation and low interest rates: Demography matters," International Finance, Wiley Blackwell, vol. 22(3), pages 262-278, December.
    11. Ms. Izabela Karpowicz & Mrs. Nujin Suphaphiphat, 2020. "Productivity Growth and Value Chains in Four European Countries," IMF Working Papers 2020/018, International Monetary Fund.
    12. Mateo Zokalj, 2016. "The impact of population aging on public finance in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 40(4), pages 383-412.
    13. Akihiro Otsuka, 2021. "A new approach to inter‐regional network externalities in Japan," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 1051-1067, June.
    14. Juan Carlos Berganza & Pedro del Río & Fructuoso Borrallo, 2016. "Determinants and implications of low global inflation rates," Occasional Papers 1608, Banco de España.
    15. Vymyatnina, Yulia V. (Вымятнина, Юлия В.) & Grishchenko, Vadim O. (Грищенко, Вадим О.) & Ostapenko, Vsevolod M. (Остапенко, Всеволод М.) & Ryazanov, Viktor T. (Рязанов, Виктор Т.), 2018. "Financial Instability and Economic Crises: Lessons from Minsky [Финансовая Нестабильность И Экономические Кризисы: Уроки Мински]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 20-41, August.
    16. Cao, Huoqing & Chen, Shiyi & Xi, Xican, 2023. "Aging, migration, and structural transformation in China," Economic Modelling, Elsevier, vol. 126(C).
    17. Dániel Baksa & Zsuzsa Munkácsi, 2019. "More Gray, More Volatile? Aging and (Optimal) Monetary Policy," Bank of Lithuania Working Paper Series 67, Bank of Lithuania.
    18. Tan, Youchao & Liu, Xiumei & Sun, Hanwen & Zeng, Cheng(Colin), 2022. "Population ageing, labour market rigidity and corporate innovation: Evidence from China," Research Policy, Elsevier, vol. 51(2).
    19. Nickel, Christiane & Bobeica, Elena & Lis, Eliza & Sun, Yiqiao, 2017. "Demographics and inflation," Working Paper Series 2006, European Central Bank.
    20. Remi Jedwab & Daniel Pereira & Mark Roberts, 2019. "Cities of Workers, Children or Seniors? Age Structure and Economic Growth in a Global Cross-Section of Cities," Working Papers 2019-13, The George Washington University, Institute for International Economic Policy.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:jicepx:v:08:y:2017:i:02:n:s1793993317500089. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/jicep/jicep.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.