produced reasonable estimates, with a hump-shaped function of age that reaches a maximum at approximately 40 years.

For the sample of OECD countries, the United States lies pretty much in the mean of the sample of average ages. For the latest year (2000), the mean age of the U.S. workforce in the Feyrer data set is 40.1, while the range for OECD countries is 37.7 to 45.0 years. The average age of the workforce is estimated to increase from 41.1 years in 2010 to 43.2 years in 2030, so the mean value is within the range of estimates in the data used to estimate the productivity function.

Table 6-2 shows calculations analogous to those shown in Table 6-1 for the aggregate productivity equations. These equations estimate the impact of polynomial functions of the change in mean age on the change in the logarithm of total factor productivity using the Feyrer data set. For all three specifications, the committee has taken the mean age of the labor force from its estimated and projected age distributions for the years 2010, 2020, and 2030. If the equations are nested, the cubic term is statistically insignificant when the linear and quadratic terms are included (p = 0.46). The quadratic term is statistically significant when the linear term is included (p = 0.034). On a statistical basis, therefore, the committee prefers the quadratic specification in Table 6-2.

In the preferred equation, the change in the age distribution subtracts approximately 0.1 percent per year from aggregate productivity over the next two decades. However, this finding is sensitive to alternative specifications.

Conclusion on Productivity

The impact of changes in the composition of the labor force on productivity shows consistent results in all the committee’s tests. Even though the numbers vary slightly depending on the technique, estimation period, and group, the estimates all indicate that the age composition effect on

TABLE 6-2   Projected Impact of Changing Age Distribution on Productivity Using Three Aggregate Productivity Estimates, 2010–2020 and 2020–2030

  Impact of Changing Age Distribution on Productivity (% change per year)
Productivity Estimates 2010–2020 2020–2030
Linear 0.60 0.25
Quadratic −0.06 −0.14
Cubic 0.09 0.04

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