Ageing and Productivity An Exploratory Analysis of the Portuguese Case

Main Article Content

Mariana Monteiro
Marta C. N. Simões

Abstract

The Portuguese labour force is ageing rapidly, corresponding to an increase in the share of older cohorts in the workforce, and there are no prospects that this situation will slow down. This study carries out an empirical analysis of the impact of workforce ageing on labour productivity in the Portuguese economy considering data for the period 1971-2017. We investigate the main channels through which these demographic changes affect labour productivity, the accumulation of factors of production, physical or human capital, and total factor productivity (TFP), based on a Cobb-Douglas production function. The results from the estimation of our VAR model defined according to the aggregate production function that includes the capital-output ratio, educational attainment, TFP and an indicator of workforce ageing, and the corresponding impulse-response functions analysis do not allow us to identify any impact of the growth rate in the proportion of older workers on the growth rate of labour productivity. For the time being it thus seems that workforce ageing has not posed a serious threat to the Portuguese economy, but this situation could rapidly change in the near future given the dismal demographic forecasts that project that the Portuguese population will decrease from 10.5 millions of people in 2012 to 8.6 millions in 2060 (INE 2014).

Article Details

Section
Articles

References

Acemoglu, D. & Restrepo, P. (2017). Secular Stagnation? The Effect of Aging on Economic Growth in the Age of Automation. American Economic Review, 107 (5): 174-79.
Acemoglu, D. & Restrepo, P. (2018). Demographics and Automation. NBER Working Papers No 24421.
Aiyar, S., & Dalgaard, C-J. L. (2009). Accounting for productivity: is it OK to assume that the world is Cobb-Douglas? Journal of Macroeconomics, 31(2), 290-303.
Aiyar, S., Ebeke,C. & Shao, X. (2016). The Impact of Workforce Aging on European Productivity. IMF Working Papers 16/238, International Monetary Fund.
Albuquerque, P. (2015). Demographics and the Portuguese economic growth. ISEG WP No. w17/2015/DE/SOCIUS/CSG.
Alves, R. P. (2017). Portugal: a Paradox in Productivity. GEE Papers No. 0070.
Bação, P., Gaspar, I. & Simões, M. (2019). Corruption and economic growth: the case of Portugal. Notas Económicas, 49 (December), forthcoming.
Daniele, F.; Honiden, T. & Lembcke, A. (2019). Ageing and productivity growth in OECD regions: Combatting the economic impact of ageing through productivity growth? OECD Regional Development Working Papers No 2019/08.
Eurostat (2018). Record high old-age dependency ratio in the EU. From https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20180508-1?inheritRedirect=true
Feyrer, J. (2007). Demographics and productivity. The Review of Economics and Statistics, 89(1), 100-109.
Feyrer, J. (2008). Aggregate Evidence on the Link between Age Structure and Productivity. Population and Development Review, 34, 78-99.
Galenson, David W. (2019). The Nature of Creativity in Old Age. University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-67.
Hall, R. E., & Jones, C. I. (1999). Why do Some Countries Produce So Much More Output Per Worker than Others? The Quarterly Journal of Economics, 114(1), 83-116.
INE (2014). Resident population projections 2012-2060. Lisbon: INE.
Liu, Y. & Westelius, N. (2017). The Impact of Demographics on Productivity and Inflation in Japan, Journal of International Commerce, Economics and Policy, 8(2), 1-16.
Maestas, N.; Mullen, K. J. & Powell, D. (2016). The Effect of Population Aging on Economic Growth, the Labor Force and Productivity. NBER Working Papers No 22452.
Nagarajan, N. R., Teixeira, A. A., & Silva, S. T. (2016). The impact of an ageing population on economic growth: an exploratory review of the main mechanisms. Análise Social, 218, 4-35.
National Productivity Board (2019). The Productivity of the Portuguese Economy - 1st Report of the National Productivity Board. https://conselhoprodutividade.com/publicacoes-proprias-own-publications/
Poplawski-Ribeiro, M. (2019). Labour force ageing and productivity growth. Applied Economics Letters.
Schwert, G. W. (1989). Tests for unit roots: A Monte Carlo investigation. Journal of Business and Economic Statistics, 7(2), 147-160.
van Ours, J.C. & Stoeldraijer, L. De Economist (2011). Age, Wage and Productivity in Dutch Manufacturing. De Economist 159(2), 113–137.
Werding, M. (2008). Ageing and productivity growth: are there macro-level cohort effects of human capital? CESifo Working Paper No. w2207.
WHO (2015). World report on ageing and health. Geneva: World Health Organisation.