The Impact of Demographics on Productivity and Inflation in Japan

December 8, 2016

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Format: Chicago

Niklas J Westelius, and Yihan Liu. The Impact of Demographics on Productivity and Inflation in Japan, (USA: International Monetary Fund, 2016) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Is Japan’s aging and, more recently, declining population hampering growth and reflation efforts? Exploiting demographic and economic variation in prefectural data between 1990 and 2007, we find that aging of the working age population has had a significant negative impact on total factor productivity. Moreover, prefectures that aged at a faster pace experienced lower overall inflation, while prefectures with higher population growth experienced higher inflation. The results give strong support to the notion that demographic headwinds can have a non-trivial impact on total factor productivity and deflationary pressures.

Subject: Aging, Inflation, Labor, Labor force participation, Population and demographics, Population growth, Prices, Production, Total factor productivity

Keywords: Aging, Annual total factor productivity growth, Dependency ratio, Depressed total factor productivity, Global, Inflation, Labor force participation, Population Growth, Prefectural total factor productivity, Productivity, Productivity gap, TFP growth, Total factor productivity, UN data, UN population statistic, Working age population, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/237
Stock No:

WPIEA2016237
ISBN:

9781475559712
ISSN:

1018-5941

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