Demographic Structure and Comparative Advantages: Theory and Evidence

Abstract We present a simple model to address how the demographic structure of a country determines trade pattern. A country with a higher ratio of youth in its workforce demonstrates more learning-by-doing capability and is associated with a faster productivity catch-up to a technology frontier country, thereby gaining comparative advantages in more industries and thus higher incomes. This theoretical prediction is supported by cross-country evidence obtained from a system GMM estimation. We find that the age group 25-44 has the largest influence on productivity catch-up. Moreover, a high quality of human capital among those who study abroad significantly facilitates productivity catch-up. JEL classifications: J21, J24, O33, O47