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Demographic Maturity and Economic Performance: The Effect of Demographic Transitions on Per Capita GDP Growth

Author

Listed:
  • Rafael Gómez

    (London School of Economics)

  • Pablo Hernández de Cos

    (Banco de España)

Abstract

This paper estimates the response of per capita GDP growth to changes in the proportion of mature workers across countries. We define and estimate the effect of demographic maturity in two ways. First, a growing cohort of working age persons (15-64) is found to have a large positive effect on growth of GDP per capita. Second, an increase in the number of prime age workers (35-54) as a fraction of the total working age population (15-64) is found to have a positive but diminishing effect on per capita GDP growth. We find that growth peaks when the ratio of prime age workers over the potentially active population reaches 0.36. Beyond this ratio, diminishing returns set in. Several well known theoretical models of economic growth and labour market performance are consistent with these findings. In particular, the standard life-cycle framework, "Mincerian" earnings equations and personnel economic models of optimal mixes of youth and mature human capital all find confirmation in these estimates.

Suggested Citation

  • Rafael Gómez & Pablo Hernández de Cos, 2003. "Demographic Maturity and Economic Performance: The Effect of Demographic Transitions on Per Capita GDP Growth," Working Papers 0318, Banco de España.
    • Handle: RePEc:bde:wpaper:0318
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0318e.pdf
    File Function: First version, December 2003
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chile's Economy - Steady as She Goes
      by CV in alpha.sources.cv on 2010-07-15 20:40:28
    2. Chile’s Economy – Steady as She Goes
      by Claus Vistesen in credit writedowns on 2010-07-15 23:45:00
    3. Chile's Economy - Steady as she Goes
      by CV in global economy matters on 2010-07-17 15:14:00

    Citations

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    Cited by:

    1. Rafael Gómez & Pablo Hernández de Cos, 2006. "The importance of being mature: the effect of demographic maturation on global per-capita income," Occasional Papers 0604, Banco de España.
    2. Rafael Gómez & Pablo Hernández de Cos, 2008. "The importance of being mature: the effect of demographic maturation on global per capita GDP," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 589-608, July.
    3. Malmberg, Bo & Lindh, Thomas & Halvarsson, Max, 2005. "Productivity consequences of workforce ageing - Stagnation or a Horndal effect?," Arbetsrapport 2005:17, Institute for Futures Studies.
    4. Blagica Petreski & Pavle Gacov, 2018. "Sustainability of the pension system in Macedonia: A comprehensive analysis and reform proposal with MK-PENS – dynamic microsimulation model," Finance Think Policy Studies 2018-02/14, Finance Think - Economic Research and Policy Institute.
    5. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Working Papers 0513, Banco de España.

    More about this item

    Keywords

    growth; demography; age structure;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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