Scandinavian evidence on growth and age structure

The age distribution is seldom taken into consideration in macroeconometric papers in spite of the fact that established economic theories predict that demographic factors will affect the aggregate economy. This paper investigates empirically the influence of age variables on growth. Unlike recent papers on the subject, the focus here is on investigating the relationship on annual data for individual Scandinavian countries. Estimations of a typical growth specification, augmented with age variables, are run and the results indicate that economic growth is indeed affected by the age distribution, where the demographic structure catches the medium-run trend in the growth rate. The robustness of this finding is first checked by instrumental-variable regressions to control for the potential endogeneity of the economic variables, and then by running ridge regressions to mitigate the collinearity between the age variables.