What are the drivers of TFP in the Aging Economy? Aging labor and ICT capital

The purpose of this paper is to investigate what are the drivers of the TFP, focusing on the quality of the labor and capital inputs. We investigate how different combinations of age and skill groups in the labor input and the ICT content of the capital input are related to TFP in the manufacturing industries of some OECD countries. We find that among the low-skilled the aging process is a negative driver of productivity, but among the high-skilled it is a positive driver. We also examine how the interactions of ICT intensity and worker age/skill combinations are related to TFP. We suggest labor and ICT indexes which tell how much the development of age/skill group shares would have affected TFP without increase in ICT use, or how much ICT would have affected TFP without changes in work force composition.

► Estimation of productivity contributions of age/skill groups and ICT capital using OECD data. ► A labor index measures productivity impact of work force composition, with fixed ICT intensity. ► An ICT index measures productivity impact of ICT, given fixed work force composition. ► Interaction effect measures the joint impact of ICT and work force composition.