The Relationship Between Population Ageing And Economic Growth

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Date
2017-08
Authors
Brendan, Lo Rick
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Publisher
Universiti Sains Malaysia
Abstract
Asia has experienced and maintained a strong economic growth since the 1960s, even when larger and developed economies have begun to fall into debt and financial crisis. However, declining total fertility rate (TFR) and increasing life expectancy have cultivated a disproportionate growth of the elderly group of individuals in the population. As the median age increases, the Asian nations begin to experience the negative pressures of population ageing. This dissertation analyses the relationship between population ageing and economic growth on 13 Asian countries between 1970 and 2015. 17 European countries are separately analyzed as a benchmark for comparison. The study mainly utilizes the Autoregressive Distributed Lag (ARDL) approach to cointegration and is applied to study effects of ageing on the economic growth on each individual country, followed by a regional level analysis of ageing, via panel data estimation methods, namely, the pooled mean group (PMG) estimation as well as the mean group estimation (MG). Although relatively younger than their European counterparts, the effects of population ageing have been confirmed through both the individual country analysis as well as the panel data analysis. The obtained results vary due to the different age structures of individual countries. Most of the individual Asian countries exhibited a positive relationship between the old age dependency ratio (OLD) and growth and while the European countries exhibited the opposite. When moving to the panel analysis, Asian countries exhibited a negative relationship between the old age dependency ratio and economic growth while the ratio had no significant effect on the European economies. Although this change in signs and significance may be attributed to the inclusion of more countries in the panel analysis, it has proven that as a region, Asia will suffer from the disproportionate growth of the elderly population. This effect is further confirmed through the significant relationships found between the ageing variables and domestic saving rates. This study differentiates itself from others through the panel analysis of the panel spillover effects between Asia and Europe. It is found that the decreasing share of youths in Asia will negatively affect the economic conditions of Europe, considering the imports of physical-labour reliant products from Asia to Europe. As it is now clear that the effects of ageing have affected the Asian region, appropriate policies need to be implemented, for example the “Silver Human Resource Centre” of Japan which extends the economic activity of the elderly, thus curbing the effects of ageing.
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Keywords
The relationship between population ageing , and economic growth
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