The impact of aging on economic growth based on EU panel data

Ruihanyu Sun

Master's thesis

Abstract:

With declining fertility rates, increasing rates of the elderly population, and increasing life expectancy, the aging of population has been a serious problem that should be addressed in European countries in the 21st century. As demographic factors are an essential variable influencing economic and social development, when some aging indicators change, the changes in their impact on economic growth deserve to be investigated in depth. There is a consensus in many theoretical studies that the aging of the population has an effect on economic development, but whether the effect is favourable or negative remains controversial. In this paper, after reviewing the study results on the effect of demographic aging on economic growth, the traditional economic growth model is improved by introducing variables that represent the factors of population aging to investigate the consequence about population aging on economic growth. The impact of population aging on economic performance is simultaneous in both the time and space dimensions. This paper includes the 27 members of the European Union as the study population and uses panel data from 2010-2019 to investigate the influence of demographic aging on economic growth in Europe. R-studio software is used to implement the process of data visualization and modeling in this paper to build static and dynamic panel models, respectively. The theoretical and empirical results show that population aging adversely affects economic expansion. Finally, considering the practical factors and based on the findings of the above study, encouraging the older workforce to return to the workplace, actively bringing in overseas labor，enhancing the quality of the crew, and vigorously developing the silver economy can help to mitigate the adverse effects on the economic expansion caused by population aging.

Abstract:

With declining fertility rates, increasing rates of the elderly population, and increasing life expectancy, the aging of population has been a serious problem that should be addressed in European countries in the 21st century. As demographic factors are an essential variable influencing economic and social development, when some aging indicators change, the changes in their impact on economic growth deserve to be investigated in depth. There is a consensus in many theoretical studies that the aging of the population has an effect on economic development, but whether the effect is favourable or negative remains controversial. In this paper, after reviewing the study results on the effect of demographic aging on economic growth, the traditional economic growth model is improved by introducing variables that represent the factors of population aging to investigate the consequence about population aging on economic growth. The impact of population aging on economic performance is simultaneous in both the time and space dimensions. This paper includes the 27 members of the European Union as the study population and uses panel data from 2010-2019 to investigate the influence of demographic aging on economic growth in Europe. R-studio software is used to implement the process of data visualization and modeling in this paper to build static and dynamic panel models, respectively. The theoretical and empirical results show that population aging adversely affects economic expansion. Finally, considering the practical factors and based on the findings of the above study, encouraging the older workforce to return to the workplace, actively bringing in overseas labor，enhancing the quality of the crew, and vigorously developing the silver economy can help to mitigate the adverse effects on the economic expansion caused by population aging.

Keywords

Economics, Population aging, Economic growth, Europe

Keywords

Population aging, Economics, Economic growth, Europe

Language used: English

Date on which the thesis was submitted / produced: 7. 11. 2020

Thesis defence

• Date of defence: 3. 6. 2021
• Supervisor: Tomáš Formánek
• Reader: Vladimír Holý

Vysoká škola ekonomická v Praze

Master programme / field:
Kvantitativní metody v ekonomice / Quantitative Economic Analysis