Demographic Aging and Long-Run Economic Growth in Germany

53 Pages Posted: 8 Mar 2024 Last revised: 11 Apr 2024

See all articles by Christian Ochsner

Christian Ochsner

German Council of Economic Experts

Lars Other

Friedrich-Schiller-Universität Jena

Esther Thiel

Independent

Christopher Zuber

German Council of Economic Experts

Date Written: February 15, 2024

Abstract

We study the long-run interaction between Germany’s economic growth trajectory and demographic aging. Using a comprehensive dataset, we leverage the classical production function approach to estimate potential output growth between 1970 and 2070. We account for the inherent uncertainty in our projections using Bayesian estimation techniques.Overall, Germany’s potential output growth up to 2070 will be low if current economic trends persist. In particular, the diminishing labor volume, coupled with sluggish total factor productivity and investment trend growth, contributes to the decline. Our results highlight the significance of demographic factors in shaping economic trajectories and the critical need for policy interventions to mitigate adverse effects. Our analysis can serve as valuable inputs for formulating long-term economic policies.

Keywords: demographic aging, production function, potential output, Germany, long-run forecast, economic growth

JEL Classification: E13, E17, E23

Suggested Citation

Ochsner, Christian and Other, Lars and Thiel, Esther and Zuber, Christopher, Demographic Aging and Long-Run Economic Growth in Germany (February 15, 2024). Available at SSRN: https://ssrn.com/abstract=4727797 or http://dx.doi.org/10.2139/ssrn.4727797

Christian Ochsner (Contact Author)

German Council of Economic Experts ( email )

Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
Germany

Lars Other

Friedrich-Schiller-Universität Jena ( email )

Furstengraben 1
Jena, Thuringa 07743
Germany

Esther Thiel

Independent ( email )

Christopher Zuber

German Council of Economic Experts ( email )

Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
Germany

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