decline, from 65.4 percent in 2015 to 62.3 percent by 2025. In EMDEs, the working-age share of the population peaked at 65.8 percent in 2015 and is expected to stabilize around this level for the next 10 years. While the largest declines are expected in EAP and ECA, working-age shares of the population are expected to rise in Sub-Saharan Africa and South Asia.

In addition to the changing age composition of the population, expanding female labor force participation has increased labor supply, especially in EMDEs. Female labor force participation has been broadly stable over the two decades from 1998-2002 to 2013-17, however with a wide divergence across EMDE regions. Supported by surging school enrollment and completion rates, female labor force participation rates in LAC rose by almost 6 percentage points between 1998-2002 and 2013-17. In contrast, despite some (more modest) improvements in education, they declined in SAR by almost as much over the same period. Among EMDEs, female labor force participation remains less than threequarters of male labor force participation.

The overall effect of demographics on potential growth—via TFP growth and labor supply growth—can be assessed using the production function approach. The estimates compare baseline potential growth estimates against counterfactual scenarios in which the composition of the population for all age groups and genders remains at their 1998 values.<sup>13</sup> The contribution of aging to potential growth is calculated as the difference between actual potential growth and a counterfactual derived from an “unchanged demographics” scenario. The counterfactual scenario is one in which population shares are fixed at 1998 levels (for historical contributions) or 2017 levels (for forward-looking scenarios) in the calculation of labor force participation rates and TFP growth. All other variables, including fitted labor force participation rates for each age group and gender, remain the same in both scenarios. Hence, aggregated labor supply differs between the two scenarios only because different age groups (with different inclinations to participate in the labor force) have different population shares.

The contribution of migration to potential growth is calculated as the difference between actual potential growth and a counterfactual derived from an “no-migration” scenario. The counterfactual scenario is one in which population, population shares, fertility, and life expectancy indicators are estimated under zero international migration for each country, as calculated in the UN Population Statistics.

The results suggest that, in 2013-17, population aging has lowered global potential growth by 0.2 percentage point from its 2003-07 average. Advanced economies accounted for all of this decline. In EMDEs, with the exception of ECA, growing and younger working-age populations lifted potential growth marginally over the same period. Trends in female labor force participation benefited some EMDE regions’ potential growth while weighing on potential growth in others. Over the longer-term (1998-2017), higher female labor force participation contributed 0.3 percentage point to potential growth in LAC, while it did

> 13 Such thought experiments are widely used to assess the impact of demographics on growth or growth projections (Bloom, Canning, and Fink 2010; European Commission 2015).

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