Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322404 
Year of Publication: 
2025
Series/Report no.: 
Bank of Canada Staff Discussion Paper No. 2025-3
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We examine how demographic factors influence potential output, focusing on how the age distribution of the working-age population and the old-age dependency ratio affect aggregate productivity. Following Feyrer (2007), we emphasize that the contribution to aggregate productivity varies by age group, with middle-aged individuals (aged 40 to 49) being the most productive. Our analysis shows that changes in demographic composition could explain some of the productivity trends observed in China and the United States over the past few decades. This demonstrates why it is important to incorporate the impact of demographic composition when estimating potential output. In particular, demographic factors are expected to narrow the differential in trend labour productivity (TLP) growth between China and the United States by nearly 1 percentage point between 2024 and 2030. On average, TLP growth in China could be reduced by 0.8 percentage points, while that in the United States could rise by 0.1 percentage point. Moreover, demographic factors in Canada portray a similar story to that of the United States. After averaging about 1 percentage point per year from 2010 to 2019, demographic headwinds are expected to dissipate fully through the 2020s, which could signal an upside risk to Canadian TLP growth.
Subjects: 
Productivity
Potential output
International topics
JEL: 
J11
O47
O51
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.