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<p>This paper examines the impact of workforce ageing on labor productivity in Japan using a panel of 47 prefectures over the period 2000–2020. Fixed-effects estimates suggest a positive link between the share of older workers and productivity. However, when endogeneity and dynamic adjustment processes are taken into account through a System GMM approach, the estimated effect becomes negative and statistically significant. This shift indicates that the positive fixed-effects association likely reflects spurious correlations driven by endogenous labor market dynamics rather than genuine productivity improvements. A series of robustness exercises shows that this result is stable across alternative specifications and data constructions. The magnitude of the structural effect suggests that population ageing places downward pressure on underlying productivity. To examine external validity, the analysis compares the model-implied component with prefecture-level real wages. Although ageing reduces productivity, its influence on wages is weaker and less consistent, which aligns with institutional characteristics of Japan’s labor market. Overall, the evidence indicates that workforce ageing poses a nationwide productivity challenge rather than a region-specific issue.</p>

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Workforce ageing and labor productivity in japan: spurious correlations and structural effects from prefectural panel data

  • 期刊论文

  • 发表日期：

    2026年1月31日

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  • Facundo Durán

摘要

This paper examines the impact of workforce ageing on labor productivity in Japan using a panel of 47 prefectures over the period 2000–2020. Fixed-effects estimates suggest a positive link between the share of older workers and productivity. However, when endogeneity and dynamic adjustment processes are taken into account through a System GMM approach, the estimated effect becomes negative and statistically significant. This shift indicates that the positive fixed-effects association likely reflects spurious correlations driven by endogenous labor market dynamics rather than genuine productivity improvements. A series of robustness exercises shows that this result is stable across alternative specifications and data constructions. The magnitude of the structural effect suggests that population ageing places downward pressure on underlying productivity. To examine external validity, the analysis compares the model-implied component with prefecture-level real wages. Although ageing reduces productivity, its influence on wages is weaker and less consistent, which aligns with institutional characteristics of Japan’s labor market. Overall, the evidence indicates that workforce ageing poses a nationwide productivity challenge rather than a region-specific issue.