The Impact of Workforce Aging on European Productivity

30 Pages Posted: 7 Mar 2017

See all articles by Shekhar S. Aiyar

Shekhar S. Aiyar

International Monetary Fund (IMF)

Christian Ebeke

Centre d’Etudes et de Recherches sur le Développement International, CERDI-CNRS

Date Written: December 2016

Abstract

The age-distribution of Europe's workforce has shifted towards older workers over the past few decades, a process expected to accelerate in the years ahead. This paper studies the effect of the aging of the workforce on labor productivity, identifies the main transmission channels, and examines what policies might mitigate the effects of aging. We find that workforce aging reduces growth in labor productivity, mainly through its negative effect on TFP growth. Projected workforce aging could reduce TFP growth by an average of 0.2 percentage points every year over the next two decades. A variety of policies could ameliorate this effect.

Keywords: Aging, Euro Area, Labor force participation, Economic growth, Total factor productivity, Demographic transition, Workforce Aging; Productivity; Policies

JEL Classification: E23, O30, O47

Suggested Citation

Aiyar, Shekhar S. and Ebeke, Christian, The Impact of Workforce Aging on European Productivity (December 2016). IMF Working Paper No. 16/238, Available at SSRN: https://ssrn.com/abstract=2924323

Shekhar S. Aiyar (Contact Author)

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
United States
202-623-8638 (Phone)

Christian Ebeke

Centre d’Etudes et de Recherches sur le Développement International, CERDI-CNRS ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

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