Innovation in an Aging Economy
Abstract
The US and other developed nations have experienced two concurrent phenomena over the previous two decades: Slow productivity growth and rapid workforce aging. In this paper I argue that both phenomena are linked through a demand channel. Following an instrumental variable strategy I provide evidence for a causal link between workforce aging and lower innovation. I then investigate the mechanisms leveraging export data and find that commuting zones exposed to aging international demand reduce their innovation activities. Jointly this evidence suggests that demand for innovation is a key channel linking workforce aging to lower innovation.
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