Econometric panel analysis reveals heterogeneous productivity effects of workforce aging across European sectors, highlighting the need for targeted capital and innovation investments.
Europe’s workforce is aging rapidly, with consequences far more nuanced than conventional wisdom suggests. Drawing on EU KLEMS data for the 27 EU Member States and the United Kingdom (2008–2020), this study estimates the impact of workforce aging on labor productivity using a Cobb-Douglas framework with fixed effects and instrumental variables. Sector-specific elasticities reveal marked heterogeneity: while the aggregate effect is strongly negative, it ranges from −7.5 in industry to −1.0 in agriculture and turns positive in manufacturing. These findings challenge simplistic narratives of demographic decline and call for targeted, sector-specific policy responses centered on capital deepening and innovation investment.
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Michele Fabiani (2026) studied this question.
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