The Effect of Population Aging on Economic Growth
Population aging is
to have detrimental effects on
growth. However, we have little
evidence about the
magnitude of such effects.
In this paper, we exploit differential aging patterns at
level in the United States between 1980 and 2010.
Many states have
high growth rates of the 60+ population,
comparable to the predicted national growth rate
over the next
Furthermore, these differential growth rates
for reasons unrelated to economic growth, providing a natural approach to isolate the impact of aging on growth.
We predict the
at the state-level
given the state’s age structure in an initial period and exploit this predictable differential
growth to estimate
the impact of population aging on Gross Domestic Product (GDP)
growth, and its constituent parts, labor force and productivity growth.
We estimate that a
10% increase in the fraction of the population ages 60+ decreases GDP
per capita by 5.7%.
We find that this reduction in
caused by population aging
due to a decrease in
the supply of labor.
To a lesser extent, it is also due to a
productivity growth. We present evidence of
reflect the reduction in productivity.