The impact of an ageing population on economic growth in Malta

Abstract

The population in many countries is ageing, and Malta is no exception. The fall in the birth and death rates and the upsurge in life expectancy are causing a noteworthy shift in the composition of the population. Although extensive research has been carried out by international academics examining this phenomenon in different contexts, a consensus has not yet been reached on the impact of an ageing population on economic growth. Optimistic studies have concluded that an ageing population enhances economic growth, while the pessimistic perspective maintains that an ageing population lowers the growth rate. Moreover, very few studies concluded that an ageing population has no impact on economic growth. Consequently, the aim of this dissertation is to examine the extent of the relationship between an ageing population and economic growth in the context of Malta. Based on secondary data, this dissertation uses time series data covering the period from 1980 to 2016 to establish and quantify the impact of an ageing population on the economic growth in Malta. For this purpose, the Autoregressive-Distributed Lag (ARDL) bound testing approach is used. The main findings from this approach, which support the pessimistic viewpoint, suggest that for the period between 1980 and 2016, population ageing diminished economic growth in Malta. Given that Malta is characterised by an ageing population, which is negatively affecting economic growth, policies targeting the phenomenon of an ageing population should be considered. Incentives to encourage female participation in the workforce and to encourage elderly people to continue working beyond the retirement age, together with an increase in the retirement age are some examples of policies that can be implemented to help lessen the negative effect of an ageing population on economic growth in Malta.