Working Paper Revision
From Population Growth to TFP Growth
Abstract: A slowdown in population growth reduces business dynamism by increasing the share of older firms. We explore how this affects productivity growth using a business dynamics model with endogenous productivity. The growth rate of older firms is a key factor in determining the impact of population growth on productivity. Quantitatively, this effect is substantial for both the U.S. and Japan. In the U.S., slowing population growth reduces TFP growth by 0.3 percentage points from 1970 to 2060, with an even larger effect in Japan. However, TFP growth reacts slowly due to short-run counterbalancing factors.
JEL Classification: E20; J11; O33; O41;
https://doi.org/10.20955/wp.2023.006
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Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2025-09-01
Number: 2023-006
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