Francesco Grigoli, Zsoka Koczan, and Petia Topalova
INTERNATIONAL MONETARY FUND
Despite signicant headwinds from population aging in most advanced economies (AEs),
labor force participation rates show remarkably divergent trajectories both across countries
and across different groups of workers. Participation increased sharply among prime-age women
and, more recently, older workers, but fell among the young and prime-age men. This pa-
per investigates the determinants of these trends using aggregate and individual-level data.
We find that the bulk of the dramatic increase in the labor force attachment of prime-age
women and older workers in the past three decades can be explained by changes in labor mar-
ket policies and institutions, structural transformation, and gains in educational attainment.
Technological advances such as automation, on the other hand, weighed on the labor supply
of prime-age and older workers. In light of the dramatic demographic shifts expected in the
coming decades in many AEs, our findings underscore the need to invest in education and
training, reform the tax system, reduce early retirement incentives, improve the job-matching
process, and help individuals combine family and work life in order to alleviate the pressures
from aging on labor supply.