Effect of Population Ageing on Economic Growth in countries of the European Union
| Název práce v češtině: | Vliv stárnutí populace na ekonomický růst zemí Evropské unie |
|---|---|
| Název v anglickém jazyce: | Effect of Population Ageing on Economic Growth in countries of the European Union |
| Klíčová slova: | Ekonomický růst, HDP, Věk, Demografický vývoj, Růst zaměstnanosti, Obyvatelstvo v důchodu, Pracovní síla |
| Klíčová slova anglicky: | Economic growth, GDP, Age, Demographic development, Employment growth, Retired population, Labor force |
| Akademický rok vypsání: | 2023/2024 |
| Typ práce: | bakalářská práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | Mgr. Barbara Pertold-Gebicka, M.A., Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 14.06.2024 |
| Datum zadání: | 14.06.2024 |
| Seznam odborné literatury |
| Maestas, Nicole, Kathleen J. Mullen and David Powell. 2023. "The Effect of Population Aging on Economic Growth, the
Labor Force, and Productivity." American Economic Journal: Macroeconomics, 15 (2): 306-32. Liang, J., Wang, H. and Lazear, E.P., 2018. Demographics and entrepreneurship. Journal of Political Economy, 126(S1), pp.S140-S196. Bloom, David E., David Canning, a Günther Fink. 2010 “Implications of population ageing for economic growth”. Oxford Review of Economic Policy 26, č. 4 (2010): 583–612. Gagnon, Etienne, Benjamin K. Johannsen, a J. David López-Salido. “Understanding the New Normal: The Role of Demographics”. Finance and Economics Discussion Series 2016, n. 080 (2016). https://doi.org/10.17016/feds.2016.080. Cylus, Jonathan, a Lynn Al Tayara. “Health, an ageing labour force, and the economy: Does health moderate the relationship between population age-structure and economic growth?” Social Science & Medicine (1982) 287 (October 2021): 114353. https://doi.org/10.1016/j.socscimed.2021.114353. Lindh, Thomas, a Bo Malmberg. “European Union Economic Growth and the Age Structure of the Population”. Economic Change and Restructuring 42, n. 3 (01. august 2009): 159–87. https://doi.org/10.1007/s10644-008-9057-1 |
| Předběžná náplň práce |
| Research question and motivation
The focus of this thesis is to study the effect of changes in proportions of the general population across age brackets on the economic growth of countries in the European Union. In the period between 2013 and 2023, the average age of the country’s population has increased in all but two countries of the European Union (Eurostat). As the population ages, the economic growth of a country might consequently be affected by several factors, such as decreased labor force participation, employment growth or other societal or economic factors (Gagnon et al. 2016, Bloom et al., 2010). Most commonly, such impact is attributed to the increases in the proportion of the retired population, whose per capita income rapidly falls after entering retirement. The impacts of demographic development across age brackets have been closely modeled by Maestas et al. (2022) for the individual states in the United States, which has been the main inspiration for this thesis. Their study suggests that each 10% increase in a population aged above 60+ has decreases growth in GDP per capita by 5.5%. Additionally, some research suggests a relationship between economic growth and demographic distribution even at younger ages. Liang et al. (2018) concludes that an older labor force lowers the rate of new business formation, thus an aging population might be less competitive and adaptive, as entrepreneurs are more often found in the ranks of younger cohorts. However, others (Lindh & Malmberg, 2009) suggest that the most impactful age cohort on the growth of GDP is the 50-64 age group, as in the pre-retirement age cohort. In this thesis, I will explore the effects of proportional changes in age cohorts across the countries of the European Union in the past decades and investigate their effects on real-GDP growth, and whether it can be concluded, similarly to the thesis modeled on the sample from the US states, whether higher % of the retired population has a consistent negative effect on GDP growth. Additionally, such a conclusion could be used to partially explain the differences in GDP growth across European countries themselves and to estimate whether the slower economic growth of the union compared to the United States could be attributed partially to an older population. Similarly, it might be interesting to observe the difference between the age-related effects in historically different parts of Europe, mainly the western, and the ex-communist eastern part. Understanding the effects of population aging is an important prerequisite of optimal public policy making, regarding policies that could either impact the age distribution of a country, such as immigration laws, natality incentives or its social security and retirement system. Contribution Existing research suggests a negative correlation between the portion of retirees and GDP growth, (Maestas et al., 2022, Bloom., et al. 2010), and the portion of older labor force and business formation rate (Liang et al., 2018). My thesis will explore the impact of shifts in age cohorts on the GDP growth, and thus establish whether these effects are present or impactful in the European countries themselves and whether they can be used to partially explain the differences between the GDP growth rates of individual countries. Additionally, I aim to compare the impact of population aging on the economic growth of the European Union itself byweighing proportional changes in countries according to their GDP contribution to the EU GDP and weighting according to the population proportion of the country in the EU itself. The outcome could provide valuable insight into the inherent structural differences between the European economy and other major world economies. Methodology I will use an OLS regression to estimate relationship between the change in GDP per capita and the change in proportion of age cohorts in 10-year intervals. In the regression model, the explained variable representing the difference between the GDP per capita at two separate time points with a 10 year difference will be explained by the change in proportion of the population in an age group and multiple control variables with significant effects on GDP growth, such as the education level, inflation, trade openness, economic structure and others. The population will be divided into age groups, each of roughly 10 years, except the retired, 65+ group and early development, 0-15 group. The data will be obtained from the OECD database of historical population data, available for EU27 countries from 1950 until 2022. The GDP data will be provided by the World Bank. To maximize relevancy while maintaining satisfactory sample size, and avoiding significant external shocks to GDP, the model will most likely be regressed on data from 1989-2019. Outline 1. Abstract 2. Introduction a. Why do I expect the population proportions to affect the GDP b. Expected demographic changes in Europe c. Why knowing the effects of demographic distribution on economic growth might be relevant for policy making d. Contribution of the thesis to existing research e. Results of the regression 3. Literature review a. Existing literature concerning the topic b. Similar studies conducted on different regions of the world and their comparison with my thesis 4. Methodology a. Overview of relevant testable hypotheses b. Data description c. OLS Model(s) specification 5. Results and Conclusion a. Regression results, their interpretation b. Expected effects on future growth according to the expected demographic changes c. Conclusive analysis of the research outcome, practical implications |
| Předběžná náplň práce v anglickém jazyce |
| Research question and motivation
The focus of this thesis is to study the effect of changes in proportions of the general population across age brackets on the economic growth of countries in the European Union. In the period between 2013 and 2023, the average age of the country’s population has increased in all but two countries of the European Union (Eurostat). As the population ages, the economic growth of a country might consequently be affected by several factors, such as decreased labor force participation, employment growth or other societal or economic factors (Gagnon et al. 2016, Bloom et al., 2010). Most commonly, such impact is attributed to the increases in the proportion of the retired population, whose per capita income rapidly falls after entering retirement. The impacts of demographic development across age brackets have been closely modeled by Maestas et al. (2022) for the individual states in the United States, which has been the main inspiration for this thesis. Their study suggests that each 10% increase in a population aged above 60+ has decreases growth in GDP per capita by 5.5%. Additionally, some research suggests a relationship between economic growth and demographic distribution even at younger ages. Liang et al. (2018) concludes that an older labor force lowers the rate of new business formation, thus an aging population might be less competitive and adaptive, as entrepreneurs are more often found in the ranks of younger cohorts. However, others (Lindh & Malmberg, 2009) suggest that the most impactful age cohort on the growth of GDP is the 50-64 age group, as in the pre-retirement age cohort. In this thesis, I will explore the effects of proportional changes in age cohorts across the countries of the European Union in the past decades and investigate their effects on real-GDP growth, and whether it can be concluded, similarly to the thesis modeled on the sample from the US states, whether higher % of the retired population has a consistent negative effect on GDP growth. Additionally, such a conclusion could be used to partially explain the differences in GDP growth across European countries themselves and to estimate whether the slower economic growth of the union compared to the United States could be attributed partially to an older population. Similarly, it might be interesting to observe the difference between the age-related effects in historically different parts of Europe, mainly the western, and the ex-communist eastern part. Understanding the effects of population aging is an important prerequisite of optimal public policy making, regarding policies that could either impact the age distribution of a country, such as immigration laws, natality incentives or its social security and retirement system. Contribution Existing research suggests a negative correlation between the portion of retirees and GDP growth, (Maestas et al., 2022, Bloom., et al. 2010), and the portion of older labor force and business formation rate (Liang et al., 2018). My thesis will explore the impact of shifts in age cohorts on the GDP growth, and thus establish whether these effects are present or impactful in the European countries themselves and whether they can be used to partially explain the differences between the GDP growth rates of individual countries. Additionally, I aim to compare the impact of population aging on the economic growth of the European Union itself byweighing proportional changes in countries according to their GDP contribution to the EU GDP and weighting according to the population proportion of the country in the EU itself. The outcome could provide valuable insight into the inherent structural differences between the European economy and other major world economies. Methodology I will use an OLS regression to estimate relationship between the change in GDP per capita and the change in proportion of age cohorts in 10-year intervals. In the regression model, the explained variable representing the difference between the GDP per capita at two separate time points with a 10 year difference will be explained by the change in proportion of the population in a certain age group and multiple control variables with significant effects on GDP growth, such as the education level, inflation, trade openness, economic structure and others. The population will be divided into age groups, each of roughly 10 years, except the retired, 65+ group and early development, 0-15 group. The data will be obtained from the OECD database of historical population data, available for EU27 countries from 1950until 2022. The GDP data will be provided by the World Bank. To maximize relevancy while maintaining satisfactory sample size, and avoiding significant external shocks to GDP, the model will most likely be regressed on data from 1989-2019. Outline 1. Abstract 2. Introduction a. Why do I expect the population proportions to affect the GDP b. Expected demographic changes in Europe c. Why knowing the effects of demographic distribution on economic growth might be relevant for policy making d. Contribution of the thesis to existing research e. Results of the regression 3. Literature review a. Existing literature concerning the topic b. Similar studies conducted on different regions of the world and their comparison with my thesis 4. Methodology a. Overview of relevant testable hypotheses b. Data description c. OLS Model(s) specification 5. Results and Conclusion a. Regression results, their interpretation b. Expected effects on future growth according to the expected demographic changes c. Conclusive analysis of the research outcome, practical implications |