The wealth of working nations

Due to aging populations, the gap between GDP growth per capita and GDP growth per working-age adult (or per hour worked) has widened in many advanced economies. Countries like Japan, which have shown lackluster GDP growth per capita, have performed surprisingly well in terms of GDP growth per working-age adult (or per hour worked). Many advanced economies are also following similar balanced growth paths per working-age adult despite significant differences in the levels of GDP per working-age adult. We calibrate a standard neoclassical growth model to reflect changes in the working-age population for each economy. This model aligns more closely with the data for all the economies in our sample when we match GDP growth per working-age adult rather than when we match GDP growth per capita, the “canonical” calibration target.