Impact of Population and Workforce Aging on Economic Growth: Case Study of Taiwan

Abstract

Taiwan’s population is aging at a fast pace, and its aged society is expected to transition into a hyper-aged society within eight years. Population aging has been a matter of international concern; however, there remain differing views about its economic impact. Thus, this study aims to examine the impact of population and workforce aging on Taiwan using quarterly data from 1981–2017. The empirical results demonstrate that an aging workforce has a significantly positive impact on the rate of economic growth. However, the old-age dependency ratio has a significantly negative effect on economic growth. The empirical findings indicate that human capital is essential for total factor productivity (TFP) growth and that workforce and population aging mainly impact productivity through TFP. Accounting for policy factors, increasing the supply of the eldercare workforce and foreign manpower contribute toward countering the negative impact of an aging population on national economic growth. Policies on retirement, pension systems, health care, and human capital accumulation that target the aged population are discussed, accompanied by policy suggestions.

Does the Aging Population Become a Constraint to the Growth of Turkish Economy? New Evidence from Time Series Analysis

“…Maestas et al (2014) for the USA and Bawazir, Aslam and Bin Osman (2020) for Middle East countries provided similar findings. Our finding is not consistent with the results of Huang et al (2019), who dealt with the population aging-economic growth relationship for Taiwan during 1981-2017 by conducting a regression analysis. Neither is it consistent with Zhao et al (2018), who examined the link among population aging, finance, and economic growth for 31 Chinese provinces from 2000 to 2016 by carrying out a panel data analysis.…”

“…Their results suggested that the ongoing aging process is expected to affect the economy negatively. Some authors such as Fougere and Merette (1999), Ihori, Kato, Kawade and Besshocovers (2005), Cervallati and Sunde (2009), Uddin, Alam and Gow (2016), Acemoglu and Restrepo (2017), Huang, Lin and Lee (2019) demonstrate a positive effect between aging and economic growth. According to Fougere and Merette (1999), their results for seven OECD countries suggest that population aging could create more opportunities for future generations to invest in human capital formation, which would encourage economic growth and reduce significantly the apprehended negative impact of aging on output per capita.…”

“…The study conducted by Acemoglu and Restrepo in 2017, argues that aging will not have a negative effect on economic growth linked to the technological developments that replaced the labor force. Huang et al (2019) empirical results for Taiwan showed that the aging workforce effect economic growth positively. On the other hand, the old-age dependency effects the economic growth negatively.…”

Demographic Transition for Economic Development in Taipei,China: Literature and Policy Implications

“…However, data limitations and a rapid aging rate make statistical estimation difficult. Huang, Lin, and Lee (2019) used quarterly data from 1981 to 2017 to examine the impact of Taipei,China's aging society on its economic growth rate, utilizing the old-age dependency ratio (ODAR, %), the population aged 65 years and above divided by the population aged 15-64 years, the aging workforce (AgeWorker, %), the ratio of workers aged 55-64 years to the total workforce, and the national average real GDP per worker (WGDP) as proxies for the population, workforce aging, and economic productivity, respectively. Note that Taipei,China has been implementing welfare and care policies targeting the elderly since the launch of the Senior Citizens Welfare Act in 1980.…”

Investigating Factors Related to Easy of Doing Business Score in Asian Countries

“…Dey (2019) said that low-income level is used in consumption purposes. Huang, Lin and Lee (2019) demonstrated that old-age dependency ratio had a significant negative impact on economic growth. Jaoui and Rashid (2015) suggested reinforcing the legal rights of borrowers and lenders under collateral and bankruptcy laws to improve access to finance in Qatar.…”