Productivity Potential by Age and Cohort: Examples from Different World Regions

Vegard Skirbekk, International Institute for Applied Systems Analysis (IIASA)
Elke Loichinger, International Institute for Applied Systems Analysis (IIASA)
Daniela Weber, International Institute for Applied Systems Analysis (IIASA)

The Old Age Dependency Ratio (OADR) is a widely used measure to compare the extent of current and prospective aging across countries. It does, however, not allow a meaningful assessment of the challenges of aging populations, since it does not include any information about individual characteristics besides age. Existing alternative indicators based on health suffer from measurement and comparability problems, while measures including information on economic activity lack predictability. We suggest focusing instead on the productivity potential of individuals of different ages, measured by age-specific cognitive abilities. Cognitive abilities are measured in a standardized way and have become the most important predictor of work performance, which is why they represent a way of comparing differences in productivity potential across countries. We find that countries with the oldest populations, as measured by OARD, are those that are also better prepared for the consequences of aging than countries with younger populations.