The Effect of Population Aging on Economic Growth, the Labor Force and Productivity
Population aging is expected to slow U.S. economic growth. We use variation in the predetermined component of population aging across states to estimate the impact of population aging on growth in GDP per capita for 1980-2010. We find that each 10% increase in the fraction of the population ages 60+ decreased per-capita GDP by 5.5%. One-third of the reduction arose from slower employment growth; two-thirds was due to slower labor productivity growth. Labor compensation and wages also declined in response. Our estimate implies population aging reduced the growth rate in GDP per capita by 0.3 percentage points per year during 1980-2010.
We are grateful to the Alfred P. Sloan Foundation Working Longer Program for grant funding. We thank Abby Alpert, Axel Börsch-Supan, David Cutler, Mary Daly, Edward Glaeser, Claudia Goldin, Larry Katz, Jim Poterba, Robert Willis, Dan Wilson, and the CBO Panel of Economic Advisers for valuable feedback, as well as participants of the 2014 SIEPR/Sloan Working Longer Conference at Stanford University, the Harvard Labor Economics Seminar, and CEPRA-NBER Conference on Ageing and Health (Lugano) for their many helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Kathleen J. Mullen
I have received financial support summing to at least $10,000 in the past three years from the following organizations:
(1) U.S. Social Security Administration
(2) The Alfred P. Sloan Foundation
(3) The National Institute on Aging
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