While there are growing concerns about population aging, some studies explore the possibility that population aging can give rise to a silver dividend which contributes to economic growth [AEIR (2019)]. Whereas the demographic dividend refers to the increase of the working-age population, the silver dividend points to increased longevity and longer working life as potential sources of growth in an aging society. Extending Lee and Shin (2021) to include developing countries, we examine the potential for a silver dividend by investigating the channels through which population aging affects economic growth. We find that lower TFP growth is the main mechanism through which population aging harms economic growth. Labor shortage caused by population aging is mostly offset by higher labor force participation rates of males, females, and old workers. In particular, the labor force participation rate of the elderly increases the most. We find that higher life expectancy, human capital, and trade openness amplifies the mitigating impact of elderly labor. Grouping countries according to seven characteristics, (1) old dependency ratio, (2) human capital, (3) life expectancy, (4) labor market flexibility, (5) government size, (6) trade openness, and (7) capital market openness, we find population aging has non-linear effects. In particular, the effect of population aging is even not negative for countries with low values of some characteristics. We also confirm that the mitigating effect of labor force participation is not enough to offset the negative effect of population aging. Although the shortage of labor can be completely nullified by higher labor force participation, the main channel for the negative growth effect of aging is lower TFP growth, which is difficult to offset. This is especially true in countries with high values of country characteristics, which are mostly advanced countries
