I'm originally an economist who focused on Japan and have looked at demographics for years. There are lots of potential causal channels, lower investment, the thinning of markets for specialized labor and physical inputs, lots of abandoned housing (and even universities!) and the unwinding of economies of scale. However, I know of no work that tries to disentangle such potential mechanisms, admittedly I've not looked. It's not that there isn't dynamism in various industries / geographies in Japan, it's that I've seen no evidence it will move the needle. It might be better if policy didn't add additional headwinds, but IMHO Abenomics never moved beyond slogans. Anyway, a large slowdown in growth that links back to (or at least correlates with) demographics is to me common sense.
However, contrary to the book title, in Japan I don't see a link from demographics to rising real wages, waning inequality or inflation. If anything, the last 20 years suggest the latter two are made worse, greater inequality and deflation, and precious little growth in real consumption. The regressions reported here though don't address those claims, they're specific to aggregate growth, so these comments are an aside.
I'm originally an economist who focused on Japan and have looked at demographics for years. There are lots of potential causal channels, lower investment, the thinning of markets for specialized labor and physical inputs, lots of abandoned housing (and even universities!) and the unwinding of economies of scale. However, I know of no work that tries to disentangle such potential mechanisms, admittedly I've not looked. It's not that there isn't dynamism in various industries / geographies in Japan, it's that I've seen no evidence it will move the needle. It might be better if policy didn't add additional headwinds, but IMHO Abenomics never moved beyond slogans. Anyway, a large slowdown in growth that links back to (or at least correlates with) demographics is to me common sense.
However, contrary to the book title, in Japan I don't see a link from demographics to rising real wages, waning inequality or inflation. If anything, the last 20 years suggest the latter two are made worse, greater inequality and deflation, and precious little growth in real consumption. The regressions reported here though don't address those claims, they're specific to aggregate growth, so these comments are an aside.
Thanks very interesting! But an R2 below 0,2 seems low. How does that affect your conclusions?