Demographic shifts and economic growth: A global analysis across ageing and non-ageing economies

The growing disparity between the world’s ageing and non-ageing demographic structures poses a significant challenge to the core assumption of liberal globalization, which is that open markets and capital flows guarantee unconditional growth convergence across nations. This study employs unbalanced panel data from 123 countries from 1960 to 2020 to investigate how demographic structure (ageing vs. non-ageing countries) conditions the effectiveness of driving global economic levels, notably trade openness and foreign direct investment (FDI), on economic growth. Utilizing fixed effects, random effects, and 2SLS models, the evidence shows that trade openness is a universally positive driver of economic growth across all demographic profiles. In contrast, the effectiveness of FDI inflows is demographically conditional since it is negatively associated with non-ageing countries’ economic growth exclusively, suggesting capital exploitation and poor economic integration. This study also found a negative association between net migration rates and economic growth everywhere, implying systemic failures in immigrant integration. More interestingly, this study found that longevity is beneficially important for ageing countries, which could promote innovation and national savings, whereas detrimental for non-ageing economies with increasing dependency. Simiarly, the returns to human capital (years of schooling) are found to be nonlinearly U-shaped in ageing countries, suggesting sustained educational investment for positive economic outcomes. In addition, higher initial capital stock per capita consistently reduces economic growth across all groups, supporting the diminishing returns to capital and capital misallocation hypothesis. These results, therefore, challenge the neoclassical premise of unconditional economic convergence. As a result, policymakers should not consider universal prescriptions for all groups, but instead should develop specialized, demographically tailored plans and policies that prioritize efficient capital allocation and robust economic integration strategies for both migrants and FDI.