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Population Aging, Retirement, and Aggregate Productivity

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  • Klaus Gründler
  • Niklas Potrafke

Abstract

Most industrialized countries today are facing historical demographic changes, paring increasing retirement with a declining labor force. We study the consequences of an increasing pensioner-worker ratio in a macroeconomic framework, which suggests a negative effect on total factor productivity. Using newly collected longitudinal data on pensioners, we quantify this effect by exploiting variation in the pre-determined component of retirement. We find that a 10-point increase in the pensioner-worker ratio decreases factor productivity by 5-6%. The effect is stronger when production is labor intensive and automation potential is low. Economic aging also impedes the creation of innovation at the technological frontier.

Suggested Citation

  • Klaus Gründler & Niklas Potrafke, 2023. "Population Aging, Retirement, and Aggregate Productivity," CESifo Working Paper Series 10594, CESifo.
    • Handle: RePEc:ces:ceswps:_10594
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    More about this item

    Keywords

    aging; retirement; factor productivity; secular stagnation; demographic transition;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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