Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 1998:4: Scandinavian Evidence on Growth and Age Structure

Björn Andersson ()
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Björn Andersson: Department of Economics, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: The age distribution is seldom taken into consideration in macroeconomic, and macro-econometric papers. This in spite of the fact that established economic theories predict that demographic factors will affect the aggregate economy. This paper focuses on economic growth and investigates empirically the influence of age variables on growth. Unlike other recent papers on the subject, the focus here is on annual data and individual countries, namely Denmark, Finland, Norway, and Sweden. Estimations of a typical growth specification, augmented with age variables and other, more volatile, economic variables, are carried out, and results from these regressions seem to indicate that economic growth is indeed affected by the age distribution. The effect does not disappear when the specification is reestimated using an instrumental variable estimator in order to correct for the potential endogeneity of the economic variables. Since the age variables are highly correlated with each other, experiments with ridge regressions are also made in order to mitigate the collinearity which obscures the results when all of the age variables are included in the regressions.

Keywords: growth; age structure; Scandinavian countries; ridge regression

JEL-codes: J11; O40; O57

27 pages, January 15, 1998

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