Abstract
AbstractIn the coming years, the share of the working‐age population in the total population will start to decline in all countries of the European Union. All other things remaining equal, this so‐called demographic burden will have a downward effect on economic growth. This paper examines whether the Europe 2020 employment targets would be sufficient to compensate for the downward impact of demographic burden and whether the impact of demography on economic growth differs between EU countries and between urban and rural regions. The results show that raising employment rates to the Europe 2020 targets can restore positive opportunities for economic growth, but not in all countries and only to a limited extent. They also show that even though urban and rural regions differ in terms of population growth and growth of the working age population, the prospects for demographic burden are highly similar for both types of regions.
Highlights
Research on the impact of population growth on economic growth did not produce a univocal conclusion (a.o. Easterlin, 1967; Blanchet, 1991; Bucci, 2008), more recently several studies showed that demography matters once you take into account the age structure of the population (Bloom et al, 2003; Prskawetz et al, 2007)
In most countries, raising the employment rates to the national targets of the Europe 2020 strategy will more than compensate demographic burden, leaving room for increasing labour input to economic growth, given that the number of hours worked per employee will not decline
In terms of prospects for gross domestic product (GDP) growth, urban regions may profit from population gains while rural regions will suffer from population decline, but in terms of prospects for GDP per capita both types of regions suffer to more or less the same extent of demographic burden
Summary
Research on the impact of population growth on economic growth did not produce a univocal conclusion (a.o. Easterlin, 1967; Blanchet, 1991; Bucci, 2008), more recently several studies showed that demography matters once you take into account the age structure of the population (Bloom et al, 2003; Prskawetz et al, 2007). In Hungary and Italy, for instance, efforts to increase employment rates may prove to be successful measures to ensure economic growth, while in the Netherlands, Germany, Denmark and Ireland, efforts to increase the numbers of hours may prove to be more effective In countries where both employment rates and the number of hours worked are relatively high, such as in Austria, Finland, Sweden and the United Kingdom, measures to increase productivity may hold the best prospects. Given the expected change in the total population and the share of the working-age population in the period 2010-2020 we raised the question how much growth in employment rates is needed to compensate declines in labour input due to demographic change. The sequence of the countries is according to the annual average change in employment rates needed to reach the Europe 2020 employment targets (black stripes)
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