Ageing Population and Healthcare Expenditure Impacts on Labour Force Participation Rate in Developing-8 Countries

Abstract

Ageing population is a global phenomenon that is mainly associated with reduced mortality rates, persistent decline in fertility rates and increased life expectancy. Of the various indicators of an ageing population, demographic changes have resulted in increasing numbers and proportions of those aged 60 years and above compared to the overall nation’s population. This study investigated the impact of an ageing population and healthcare expenditure on labour force participation rate in Developing-8 (D-8) countries using panel Auto-Regressive Distributed Lag (ARDL) method and Pooled Mean Group (PMG) estimator from 2000 to 2017. The empirical findings revealed that the ageing population significantly and positively affect the labour force participation rate in D-8 countries but did not affect healthcare expenditure. Fully Modified Ordinary Least Squares and (FMOLS) and DOLS tests were employed to confirm the impact of an ageing population on labour force participation rate, whereas the latter was impeded by healthcare expenditure as reflected in its significant negative impact. These findings demonstrate the diverse impact of an ageing population and healthcare expenditure on labour force participation in D-8 countries. Therefore, policy revisions are needed to prevent the continuous rise in healthcare expenditure given the increasing ageing population across D-8 countries.