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Imitation versus innovation in an aging society: international evidence since 1870

Abstract

The budgetary implications of an aging population in the OECD are often considered dire. This study argues that this need not be the case provided that older educated workers are more innovative than their younger counterparts and that the workers with tertiary education stay in the labor force until their 60s. In using a panel of 21 OECD countries over the period 1870–2009, this paper estimates the productivity growth effects of education for different age groups, through the channels of innovation and imitation. The results show that educated workers are highly innovative and that the propensity to innovate increases sharply with age.

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Notes

  1. Related to that Cohen and Levinthal (1989) argue that in addition to pursuing new process and product innovation, firms invest in R&D to exploit externally available information. Since the focus of the model of Vandenbussche et al. (2006) is on human capital, the empirical implications of their model may well be different from those of Cohen and Levinthal (1989) in that human capital creates techniques and processes that are quite different from those of technological progress created by R&D. R&D is directed toward the creation of new processes, better technology, and higher-quality products, while investment in human capital is channeled toward increasing the knowledge of a particular field.

  2. The present value of TFP is given by \(PV=A_0 \int _0^{\infty } {e^{\left ( {g-r} \right )t}dt} =\frac {A_0 }{r-g}\), where A 0 is the initial TFP, ris the real interest rate, and g is the TFP growth rate. If the latter is increased permanently by 0.14 % points, then the present value would be \(PV_1 =\frac {A_0 }{r-(g+0.0014)}\), and the gain would be \(PV_1 -PV_0 =\frac {A_0 }{r-\left ( {g+0.0014} \right )}-\frac {A_0 }{r-g}=A_0 \times \frac {0.0014}{\left ( {r-g-0.0014} \right )(r-g)}\).

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Acknowledgments

Helpful comments and suggestions from two referees are gratefully acknowledged as is financial support from the Australian Research Council (James Ang & Jakob Madsen: DP120103026; Jakob Madsen: DP110101871).

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Correspondence to James B. Ang.

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Responsible editor: Junsen Zhang

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Ang, J.B., Madsen, J.B. Imitation versus innovation in an aging society: international evidence since 1870. J Popul Econ 28, 299–327 (2015). https://doi.org/10.1007/s00148-014-0513-0

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Keywords

  • Productivity growth
  • Human capital
  • Age structure
  • Innovation

JEL Classifications

  • I20
  • O30
  • O40