With the population ageing fast, the public budget, pension schemes and health care systems are under growing stress. Politicians look for economic growth to alleviate these problems. Yet, as the active labour force shrinks, so does GDP. Can innovation come to the rescue by boosting productivity?
This question is raised by Andreas Irme, Professor of Macroeconomics and Applied Microeconomics, and Anastasia Litina, a post-doctoral researcher at the Centre for Research in Economic Analysis (CREA), both working at the University of Luxembourg. They have studied 33 OECD countries, “to find out the actual relationship between population ageing and inventive activity across countries and time”.
Irme and Litina analysed population ageing by considering the old-age dependency ratio and inventive activity by the number of patents per 1,000 residents. They have found that this relationship is “hump-shaped with a peak occurring at a dependency ratio between 24 and 27 older people per 100 members of the working-age population” – a “surprisingly old” ratio.
They believe this may happen because societies invest in innovation to solve their age-induced problems. And even if older people seem to appreciate innovation less, the tendency is weaker in societies where the whole population is ageing. Read more on case studies of Japan and Germany and Irme and Litina’s recommendations for policy makers.