Ageing Population and Economic Growth: An Empirical Investigation

Abstract

Due to a rise in the ageing population, the upper-middle-income economies might not be able to embrace the fourth industrial revolution, thus limiting their ability to achieve highincome economies. This paper aims to investigate how the increase in the ageing population affects the economic growth of the 32 countries in the upper-middle-income economies from 1990 to 2018. By employing system GMM, the finding shows that the ageing population does adversely affect the economic growth of the upper-middle-income economies as outlined by the theory of secular stagnation. This finding requires special attention for the governments to redesign their fiscal policy by focusing on higher budget allocation on education and critical sectors. It is with a hope that the long-term growth will increase eventually even when the countries are facing a rise in the ageing population. Future researchers may extend this study by examining how ageing population affect the public debt of a country.

Unlocking Pakistan's Debt Conundrum: A Deep Dive into the Dynamics of Debt Servicing and External Debt Stock

“…Countries with larger populations tend to have higher national debts, all else being equal. The positive relationship between population and debt stock has also been found by various scholars such as (Rahman et al, 2020;Ali Gill et al, 2023;. Imports have a coefficient of 0.07.…”

“…The aging population can increase external debt due to higher healthcare and social security costs, impacting national debts. However, the old-age dependency ratio shows an insignificant relationship with debt levels (Rahman et al, 2020). Population change, particularly aging, affects national debts by altering the costs of providing benefits like Social Security and Medicare, impacting fiscal policy through changing age distributions (Ali Gill et al, 2023;Gill et al, 2023).…”

More age, less growth? Secular stagnation and societal ageing

“…On the other hand, in one of the few studies focusing upon ageing and growth in "middle income" countries, Rahman et al (2020) found that, after including a variety of other mediating factors influencing growth, there was a persistent negative relationship between population ageing and growth. Similar results were found in a study of 18 higher income European countries, in which projected trends in their age structure and economies, calculated for the next twenty years, indicated "a lower long-run potential growth rate" associated with greater demographic ageing (Favero and Galasso, 2015, p. 24).…”

“…On the other hand, in one of the few studies focusing upon ageing and growth in “middle income” countries, Rahman et al . (2020) found that, after including a variety of other mediating factors influencing growth, there was a persistent negative relationship between population ageing and growth.…”

The Relationship between Philippine Population, Remittances, Foreign Direct Investment, and Trade Openness on its Gross Domestic Product

“…Economic problems may occur because of the rising population and the lack of resources in a country (Peterson, 2017); therefore, it is necessary to analyze how different variables affect the relationship. Empirical results indicate that aging is a factor in population growth (Rahman et al, 2020). Pham and Vo (2019) said that having a young population can negatively impact GDP in the long run.…”