Workforce ageing and economic productivity. The role of supply and demand for labor for the G7 countries
Thomas Fent, Vienna Institute of Demography
Alexia Fuernkranz-Prskawetz, Vienna Institute of Demography
Ross Guest, Griffith University
The aim of this paper is to study the sensitivity of projected
economic productivity (measured by output per worker) for the G7
countries with respect to projected labor force participation
rates, the age-productivity profiles of workers and the degree of
substitutability of workers at different ages. Simulations suggest
that in a pure labor economy, the assumption of imperfect
substitution of workers at different ages implies a dividend from
workforce ageing during the next decades. Workforce ageing implies
that the actual age distribution of the workforce can be expected
to shift closer to the optimal age distribution generating a
dividend in terms of aggregate productivity. Simulations suggest
that the dividend is likely to be non-trivial in magnitude,
although the size of the effect depends very much on the values of
elasticities of substitution about which little is known.
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