Ageing and Innovation

population-pyramidsAn ageing society needs a strategy to secure its standard of living. Can we plausibly expect ageing societies to be as innovative as they need to be in order to boost the productivity of their declining labour forces? The answer is yes up to a limit of between 24 and 27 older people per 100 members of the working-age population(1).

This is the empirical result Andreas Irmen and Anastasia Litina have found(2) by analysing a panel of 33 OECD countries in the period 1960–2012. The relationship between population ageing and inventive activity turned out to be hump-shaped, with a peak occurring at that dependency ratio (see figure below). On average, countries located to the left of the hump may age and see their inventive activity increase; those to the right will inevitably see it fall as they age even further—or so they argue(3)

ageing-and-innovation
Unconditional correlations between number of Patent applications per 1000 inhabitants and OADR.

It is noticeable how population’s and individual’s “cognitive” capacity seem to behave in a similar way. The good news is the limit is relatively high. Those levels were reached in Japan from 1999–2003 and in Germany from 2001–2004. Spain OADR is about 28 today.

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(1) Old Age Dependency Ratio (OADR). The old-age dependency ratio is the ratio of the population aged 65 and over to the population 15-64 stated as the number of dependents per 100 persons of working age.

(2) Irmen, Andreas, and Anastasia Litina. 2016. ‘Population Aging and Inventive Activity’, April. https://papers.ssrn.com/abstract=2770423.

(3) Figure above… “illustrates the unconditional correlations between the number of patent applications per 1000 inhabitants (“Patents”) and the OADR in a scatter plot for each country in the sample. Several non-linear patterns emerge. For instance, humps occur for Finland (FIN) and Japan (JPN). Hump approximations may also be traced for Chile (CHL), Germany (DEU), Great Britain (GBR) or Ireland (IRL). The remaining countries exhibit different patterns.” (op. cit.)

Feature image: Population Pyramids of Spain, Germany and Japan

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