The Effect of Productivity, Employment, and Demographic Factors on Economic Welfare in Asian Countries and Turkey

Abstract

This study examines the relationship between per capita GDP and its key determinants—labor productivity, the old-age dependency ratio, and employment—using annual data for selected Asian countries (China, Japan, South Korea, Malaysia, Thailand, the Philippines, and Indonesia) and Turkey over the period 1991–2024. Cross-sectional dependence was tested using Pesaran’s (2004) CD test, homogeneity using Swamy’s (1970) test, and stationarity using the CIPS unit root test, which revealed that the variables exhibited different levels of integration. These conditions justified the application of the CS-ARDL and AMG estimation techniques. The results from both estimators show that, in both the short and long run, labor productivity and employment have a positive and statistically significant effect on per capita GDP, whereas the old-age dependency ratio exerts a negative impact on economic growth. The country-specific analyses reveal that Japan has the highest productivity coefficient (1.052), China the highest employment coefficient (1.040), and the Philippines the most negative old-age dependency coefficient (-0.483). Moreover, Dumitrescu and Hurlin’s (2012) panel causality test results indicate a bidirectional causal relationship between per capita GDP and both productivity and old-age dependency, while unidirectional causality is found from employment to per capita GDP. These findings suggest that enhancing productivity and employment is essential for sustaining economic growth, whereas population aging constitutes a structural constraint.. In particular, the results emphasize the critical roles of education, healthcare, technology, and R&D in fostering sustainable growth and development.