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Can Education Compensate the Effect of Population Aging On Macroeconomic Performance?

Author

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  • Kotschy, Rainer

    (LMU Munich)

  • Sunde, Uwe

    (LMU Munich)

Abstract
This paper investigates the consequences of population aging and of changes in the education composition of the population for macroeconomic performance. Estimation results from a theoretically founded empirical framework show that aging as well as the education composition of the population influence economic performance. The estimates and simulations based on population projections and different counterfactual scenarios show that population aging will have a substantial negative consequence for macroeconomic performance in many countries in the years to come. The results also suggest that education expansions tend to offset the negative effects, but that the extent to which they compensate the aging effects differs vastly across countries. The simulations illustrate the heterogeneity in the effects of population aging on economic performance across countries, depending on their current age and education composition. The estimates provide a method to quantify the increase in education that is required to offset the negative consequences of population aging. Counterfactual changes in labor force participation and productivity required to neutralize aging are found to be substantial.

Suggested Citation

  • Kotschy, Rainer & Sunde, Uwe, 2018. "Can Education Compensate the Effect of Population Aging On Macroeconomic Performance?," Rationality and Competition Discussion Paper Series 121, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:121
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    Cited by:

    1. Bloom, David E. & Canning, David & Kotschy, Rainer & Prettner, Klaus & Schünemann, Johannes, 2024. "Health and economic growth: Reconciling the micro and macro evidence," World Development, Elsevier, vol. 178(C).
    2. David McCollum & Hebe Nicholson & Paula Duffy, 2021. "A place-based approach to population sustainability: Demographic and economic change at the local level in Fife, Scotland," Local Economy, London South Bank University, vol. 36(6), pages 505-523, September.
    3. Anthony Strittmatter & Uwe Sunde & Dainis Zegners, 2020. "Life cycle patterns of cognitive performance over the long run," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(44), pages 27255-27261, November.
    4. Paula Prenzel & Simona Iammarino, 2021. "Labor Force Aging and the Composition of Regional Human Capital," Economic Geography, Taylor & Francis Journals, vol. 97(2), pages 140-163, March.
    5. Kotschy, Rainer, 2021. "Health dynamics shape life-cycle incomes," Journal of Health Economics, Elsevier, vol. 75(C).
    6. Mirela Cristea & Graţiela Georgiana Noja & Cecilia-Nicoleta Jurcuţ & Constantin Ştefan Ponea & Elena Sorina Caragiani & Alin Viorel Istodor, 2021. "The Interplay between Public Health, Well-Being and Population Aging in Europe: An Advanced Structural Equation Modelling and Gaussian Network Approach," IJERPH, MDPI, vol. 18(4), pages 1-20, February.
    7. Mirela S. Cristea & Marilen G. Pirtea & Marta C. Suciu & Gratiela G. Noja & S.S. Askar, 2022. "Workforce Participation, Ageing, and Economic Welfare: New Empirical Evidence on Complex Patterns across the European Union," Complexity, Hindawi, vol. 2022, pages 1-13, January.
    8. Rainer Kotschy & David E. Bloom & Andrew J. Scott & Rainer Franz Kotschy, 2024. "On the Limits of Chronological Age," CESifo Working Paper Series 11451, CESifo.
    9. Hao Cheng, 2024. "Taking grandparents to school: how school-community-family collaboration empowers intergenerational learning in China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    10. Rocha de Jesus Fernandes, Anderson & Lanza Queiroz, Bernardo, 2024. "Aging, education and some other implications for the silver dividend in developing countries: Evidence from Brazil," The Journal of the Economics of Ageing, Elsevier, vol. 27(C).
    11. Sheng, Jichuan & Ding, Rui & Yang, Hongqiang, 2024. "Corporate green innovation in an aging population: Evidence from Chinese listed companies," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    12. Kotschy, Rainer & Bloom, David E. & Scott, Andrew, 2024. "On the Limits of Chronological Age," IZA Discussion Papers 17427, Institute of Labor Economics (IZA).
    13. Rude, Johanna, 2024. "Demographic Change, Automation and the Role of Education," MPRA Paper 120876, University Library of Munich, Germany.
    14. Klaus Gründler & Niklas Potrafke, 2023. "Population Aging, Retirement, and Aggregate Productivity," CESifo Working Paper Series 10594, CESifo.
    15. Siskova, M. & Kuhn, M. & Prettner, K. & Prskawetz, A., 2023. "Does human capital compensate for population decline?," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    16. David E. Bloom & Michael Kuhn & Klaus Prettner, 2024. "Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences," Annual Review of Economics, Annual Reviews, vol. 16(1), pages 159-184, August.

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    More about this item

    Keywords

    demographic change; demographic structure; distribution of skills; projections; education-aging-elasticity;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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