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Aging and Income Convergence in Europe: A Survey of the Literature and Insights from a Demographic Projection Exercise

Crespo Cuaresma, Jesus and Loichinger, Elke and Vincelette, Gallina (2016) Aging and Income Convergence in Europe: A Survey of the Literature and Insights from a Demographic Projection Exercise. Economic Systems, 40 (1). pp. 4-17. ISSN 0939-3625

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Abstract

The current and projected low fertility levels for Europe and the continuous increases in life expectancy imply that the region will go through an unprecedented process of population aging, leading to sizeable changes in the age structure of European societies. After reviewing the existing literature on the role played by demographic change as a determinant of economic growth and income convergence, with a focus on the European experience, we analyze the quantitative impact of the projected changes in the age and education composition of the labor force. Using newly available demographic projections, we show that the current demographic trends are expected to cause a slowdown in the speed of income convergence across European countries. Our projection exercise suggests that policies aimed exclusively at improving labor force participation do not appear to be sufficient to counteract the negative effects of aging on income convergence. Instead, we show that reducing the educational attainment gap between Central and Eastern European member states and the rest of the European Union in addition to increasing labor force participation leads to an accelerated pace of income convergence.

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription. The original publication is available at www.elsevier.com.
Keywords: Aging; Income convergence; Labor force; Demographic projections; Human capital; Economic growth
Classification Codes: JEL J11; O47; O52
Divisions: Departments > Volkswirtschaft > Makroökonomie
Forschungsinstitute > Human Capital and Development
Kompetenzzentren > Nachhaltigkeit
Version of the Document: Accepted for Publication
Depositing User: Gertraud Novotny
Date Deposited: 25 Sep 2017 11:19
Last Modified: 28 Nov 2017 11:18
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/72388/
URI: http://epub.wu.ac.at/id/eprint/5675

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