POPULATION AGING, SILVER DIVIDEND AND ECONOMIC GROWTH

Despite concerns about population aging, there is potential for a ‘silver dividend’ that could enhance economic growth by extending working lives and increasing longevity. This study examines the silver dividend across a diverse set of countries, including developing economies, by analyzing how aging influences economic growth. Our findings indicate that the negative impact of aging on economic growth stems primarily from reduced total factor productivity (TFP) growth. While labor shortages caused by aging are largely mitigated by increased labor force participation among males, females and particularly older workers, this is insufficient to fully counteract the negative growth effects of aging. Enhanced life expectancy, human capital and trade openness further amplify the positive effects of elderly labor force participation. By categorizing countries based on these characteristics, we show that the effects of aging are nonlinear and vary across economies. Overall, the challenge of mitigating the negative impact of aging is particularly pronounced in countries with high values of these characteristics, which tend to be more advanced and more aged economies, where the decline in TFP growth is especially difficult to offset.