Abstract
The budgetary implications of an aging population in the OECD are often considered dire. This study argues that this need not be the case provided that older educated workers are more innovative than their younger counterparts and that the workers with tertiary education stay in the labor force until their 60s. In using a panel of 21 OECD countries over the period 1870–2009, this paper estimates the productivity growth effects of education for different age groups, through the channels of innovation and imitation. The results show that educated workers are highly innovative and that the propensity to innovate increases sharply with age.
Similar content being viewed by others
Notes
Related to that Cohen and Levinthal (1989) argue that in addition to pursuing new process and product innovation, firms invest in R&D to exploit externally available information. Since the focus of the model of Vandenbussche et al. (2006) is on human capital, the empirical implications of their model may well be different from those of Cohen and Levinthal (1989) in that human capital creates techniques and processes that are quite different from those of technological progress created by R&D. R&D is directed toward the creation of new processes, better technology, and higher-quality products, while investment in human capital is channeled toward increasing the knowledge of a particular field.
The present value of TFP is given by \(PV=A_0 \int _0^{\infty } {e^{\left ( {g-r} \right )t}dt} =\frac {A_0 }{r-g}\), where A 0 is the initial TFP, ris the real interest rate, and g is the TFP growth rate. If the latter is increased permanently by 0.14 % points, then the present value would be \(PV_1 =\frac {A_0 }{r-(g+0.0014)}\), and the gain would be \(PV_1 -PV_0 =\frac {A_0 }{r-\left ( {g+0.0014} \right )}-\frac {A_0 }{r-g}=A_0 \times \frac {0.0014}{\left ( {r-g-0.0014} \right )(r-g)}\).
References
Aghion P, Howitt P (1998) Endogenous growth theory. MIT Press, Cambridge
Ang J B, Madsen J B (2011) Can second-generation endogenous growth models explain productivity trends and knowledge production in the Asian miracle economies? Rev Econ Stat 93:1360–1373
Ang J B, Madsen J (2013) International R&D spillovers and productivity trends in the Asian miracle economies. Econ Inq 51:1523–1541
Ang J B, Madsen J B, Rabiul Islam M (2011) The effects of human capital composition on technological convergence. J Macroecon 33:465–476
Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58:277–297
Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models. J Econom 68:29–51
Barro R, Sala-I-Martin X (2004) Economic growth. The MIT Press, Cambridge
Bartel A P, Lichtenberg F R (1987) The comparative advantage of educated workers in implementing new technology. Rev Econ Stat 69:1–11
Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econom 87:115–143
Bond S R, Hoeffler A, Temple J (2001) GMM estimation of empirical growth models. Centre for Economic Policy Research discussion paper no. 3048
Cohen W M, Levinthal D A (1989) Innovation and learning: the two faces of R&D. Econ J 99:569–596
Dowrick S, Nguyen D-T (1989) OECD comparative economic growth 1950–85: catch-up and convergence. Am Econ Rev 79: 1010–1030
The Economist (2012) Enterprising oldies. The Economist Feb 25th: 66
Feyrer J (2007) Demographics and productivity. Rev Econ Stat 89:100–109
Friedland R (1993) Epidemiology, education, ecology of Alzheimer’s disease. Neurology 43:246–249
Garibaldi P, Oliveira-Martins J, Ours Jv (2011) Ageing, health and productivity: the economics of increased life expectancy. Oxford University Press, Oxford
Gerschenkron A (1952) Economic backwardness in historical perspective. In: Hoselitz B (ed) The progress of underdeveloped areas. University of Chicago Press, Chicago, pp 3–29
Giuri P, Mariani M, Brusoni S, et al (2007) Inventors and invention processes in Europe: results from the PatVal-EU survey. Res Policy 36:1107–1127
Greenwood J, Hercowitz Z, Krusell P (1997) Long-run implications of investment-specific technological change. Am Econ Rev 87:342–362
Griffith R, Redding S, Reenen Jv (2004) Mapping the two faces of R&D: productivity growth in a panel of OECD industries. Rev Econ Stat 86:883–895
Ha J, Howitt P (2007) Accounting for trends in productivity and R&D: a Schumpeterian critique of semi-endogenous growth theory. J Money Credit Bank 39:733–774
Haltiwanger J C, Lane J I, Spletzer J R (1999) Productivity differences across employers: the roles of employer size, age, and human capital. Am Econ Rev 89:94–98
Hellerstein J K, Neumark D (1995) Are earnings profiles steeper than productivity profiles? Evidence from Israeli firm-level data. J Human Resour 30:89–112
Hellerstein J K, Neumark D, Troske K R (1999) Wages, productivity, and worker characteristics: evidence from plant-level production functions and wage equations. J Labor Econ 17:409–446
Hercowitz Z (1998) The ‘embodiment’ controversy: a review essay. J Monet Econ 41:217–224
Hertzog C, Hultsch D F, Dixon R A (1999) On the problem of detecting effects of lifestyle on cognitive change in adulthood. Psychol Aging 14:528–534
Hoisl K (2007) A closer look at inventive output—the role of age and career paths. Munich School of Management discussion paper no. 2007 no. 12
Jones B F (2009) The burden of knowledge and the death of the Renaissance Man: is innovation getting harder?Rev Econ Stud 76:283–317
Jones B F (2010) Age and great invention. Rev Econ Stat 92:1–14
Keller W (2004) International technology diffusion. J Econ Lit 42:752–782
Kneller R, Stevens P A (2006) Frontier technology and absorptive capacity: evidence from OECD manufacturing industries. Oxford Bull Econ Stat 68:1–21
Le Carret N, Lafont S, Letenneur L, et al (2003) The effect of education on cognitive performances and its implication for the constitution of the cognitive reserve. Dev Neuropsychol 23:317–337
Lichtenberg F (2010) The contribution of pharmaceutical innovation to longevity growth in Germany and France. CESifo working paper series 3095
Lichtenberg F R (2012a) Contribution of pharmaceutical innovation to longevity growth in Germany and France, 2001–7. PharmacoEconomics 30:197–211
Lichtenberg F R (2012b) Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000–2009. NBER working papers no. 18235
Lichtenberg F R, van Pottelsberghe de la Potterie B (1998) International R&D spillovers: a comment. Eur Econ Rev 42:1483–1491
Lichtenberg F R, Virabhak S (2007) Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as ‘equipment for your health’. Manag Decis Econ 28:371–392
Lindh T, Malmberg B (1999) Age structure effects and growth in the OECD, 1950–1990. J Popul Econ 12:431–449
Luca G D, Mazzonna F, Peracchi F (2009) Aging, cognitive abilities and education in Europe, Paper presented at the 2009 AEA conference
Madsen J B (2007) Technology spillover through trade and TFP convergence: 135 years of evidence for the OECD countries. J Int Econ 72:464–480
Madsen J B (2008) Semi-endogenous versus Schumpeterian growth models: testing the knowledge production function using international data. J Econ Growth 13:1–26
Madsen J B (2009) Trade barriers, openness, and economic growth. South Econ J 76:397–418
Madsen J B (2010) The anatomy of growth in the OECD since 1870. J Monet Econ 57:753–767
Madsen J B, Ang J B, Banerjee R (2010a) Four centuries of British economic growth: the roles of technology and population. J Econ Growth 15:263–290
Madsen J B, Saxena S, Ang J B (2010b) The Indian growth miracle and endogenous growth. J Dev Econ 93:37–48
Malmberg B, Lindh T (2002) Population change and economic growth in the Western world, 1850–1990. Paper presented at workshop in Rostock
Mokyr J (2005) Long-term economic growth and the history of technology. In: Aghion P, Durlauf S (eds) Handbook of economic growth. North-Holland, Amsterdam, pp 1113–1180
Nelson R R, Phelps E S (1966) Investment in humans, technological diffusion, and economic growth. Am Econ Rev 56:69–75
OECD (2006a) Live longer, work longer. OECD observer no. 254
OECD (2006b) OECD employment outlook 2006. OECD, Paris
OECD (2010) OECD employment outlook moving beyond the jobs crisis. OECD, Paris
Prettner K (2013) Population aging and endogenous economic growth. J Popul Econ 26:811–834
Romer P M (1990) Endogenous technological change. J Polit Econ 98:S71–102
Salthouse T A (1985) A theory of cognitive aging. North-Holland, Amsterdam
Salthouse T A, Maurer T J (1996) Aging, job performance, and career development. In: Birren J E, Schaie K W (eds) Handbook of the psychology of aging, 4th edn. Academic Press, San Diego
Skirbekk V (2003) Age and individual productivity: a literature survey. MPIDR working papers with number WP-2003-028
Solow R M (1960) Investment and technical progress. In: Arrow K J, Karlin S, Suppes P (eds) Mathematical methods in the social sciences. Stanford University Press, Palo Alto
Vamvakidis A (2002) How robust is the growth-openness connection? Historical evidence. J Econ Growth 7:57–80
Vandenbussche J, Aghion P, Meghir C (2006) Growth, distance to frontier and composition of human capital. J Econ Growth 11:97–127
Acknowledgments
Helpful comments and suggestions from two referees are gratefully acknowledged as is financial support from the Australian Research Council (James Ang & Jakob Madsen: DP120103026; Jakob Madsen: DP110101871).
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Junsen Zhang
Electronic supplementary material
Below is the link to the electronic supplementary material.
Rights and permissions
About this article
Cite this article
Ang, J.B., Madsen, J.B. Imitation versus innovation in an aging society: international evidence since 1870. J Popul Econ 28, 299–327 (2015). https://doi.org/10.1007/s00148-014-0513-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00148-014-0513-0