Growing older and growing apart? Population age structure and trade

This paper explores the empirical relationship between population age structure and bilateral trade. I include age structure in both log and PPML formulations of the gravity equation of trade. I study relative age effects, using differences in the demographic structure of each country-pair. In line with existing literature and the recent discussions about the macroeconomic implications of aging, I find that having a relatively larger share of population in working age increases bilateral exports. This effect is robust to various estimation models, as well as to changes in the method of specifying the demographic controls. Old-age shares appear to have a weaker, negative, impact on this trade relationship, though these results differ between log specifications of the gravity equation and PPML estimates. Estimating instead the balance of trade between trading partners produces similar results, with positive effects of age structure peaking later in working life. Global populations are poised to undergo a massive transition. Trade a crucial way that the demographic deficits of one country may be offset by the dividends of another as comparative advantages shift along with the size and strength of their underlying workforce. My work is among the first to quantify the effect of relative age structure between two countries and their bilateral trade flows. Focusing for the on aggregate flows, relative age shares, and PPML estimates of the trade relationship, this paper provides the most comprehensive picture to date on how age structure affects trade.