The Impact of Demographics on Productivity and Inflation in Japan
IMF Working Papers, December 8, 2016
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- The Impact of Demographics on Productivity and Inflation in Japan
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Bibliographic details
- Authors: Niklas J Westelius, Yihan Liu
- Published: December 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475559712.001
Key question and data
- Research question: Is Japan’s aging and, more recently, declining population hampering growth and reflation efforts?
- Data used: prefectural data between 1990 and 2007.
- Authors and date: By Niklas J Westelius, Yihan Liu; December 8, 2016.
- Publication specifics:
- Pages: 18
- Volume: 2016
- Issue: 237
- Series: Working Paper No. 2016/237
- DOI: https://doi.org/10.5089/9781475559712.001
- Stock No: WPIEA2016237
- ISBN: 9781475559712
- ISSN: 1018-5941
Main empirical findings
- Total factor productivity (TFP)
- Aging of the working age population has had a significant negative impact on total factor productivity.
- Prefectural total factor productivity and annual total factor productivity growth are focal measures.
- Inflation and population dynamics
- Prefectures that aged at a faster pace experienced lower overall inflation.
- Prefectures with higher population growth experienced higher inflation.
- Overall interpretation
- 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 areas and keywords
- 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
Implications (inferred from findings)
- Demographic trends (aging and population change) can materially affect:
- Productivity growth via effects on the working age population.
- Inflation dynamics across regions, with aging associated with lower inflation and population growth associated with higher inflation.
- Policy considerations implied by results:
- Addressing demographic headwinds may be important for raising TFP and countering deflationary pressures.
- Policies that influence population growth, labor force participation, or the composition of the working age population could have macroeconomic effects on productivity and inflation.
IMF Working Paper No. 2016/237 — "The Impact of Demographics on Productivity and Inflation in Japan" by Niklas J Westelius and Yihan Liu (December 8, 2016).
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- The Impact of Demographics on Productivity and Inflation in Japan