Impact of demographic indicators on trade openness: evidence from different geographic regions

Trade openness and the share of the working-age population vary in different geographic regions of the world, and they tend to be especially high in Europe. Under the hypothesis that the share of the working-age population has a positive effect on trade openness, we clarify the difference in trade openness by region caused by age structure using panel data for the following four regions: Europe, Asia, America, and Africa. Based on fixed-effects models by region, we estimate equations that include trade openness as the dependent variable and the share of the working-age population as an independent variable. Blinder-Oaxaca decomposition is conducted setting Europe as the benchmark. Our empirical results reveal that the share of the working-age population has significantly positive effects on trade openness in all regions except Africa. Moreover, the high trade openness in Europe compared with Asia can be explained by the endowment effect of the age structure, and that compared with America or Africa can be explained by both the endowment and coefficient effects of the age structure.