IMF Working Papers

This paper provides new cross-country evidence on healthy aging—the extent to which populations age in better health across successive birth cohorts—and how this shapes labor market outcomes for older workers. Using harmonized microdata on individuals aged 50 and above in 41 countries over 2000-22, we document that physical, cognitive, and mental health have improved systematically across cohorts. To estimate causal effects, we instrument individual health with chronic disease incidence. Better health increases labor supply along both the extensive and intensive margins and raises labor earnings and labor productivity. The results are economically significant: a decade of cohort health gains in cognitive abilities raised older individuals’ labor force participation by about 20 percentage points, weekly hours by around 6, productivity by roughly 30 percent, and total labor earnings by roughly 35 percent. These results suggest that healthy aging can meaningfully bolster labor supply and productivity among older workers, mitigating demographic headwinds for growth and public finances.