Development Bank Research Bulletin

Having a large and young labor force is believed to be good for GDP growth. It has been well-received that current demographic structure of Indian population is working toward India’s favour in the next two decades when young Indian children grow up and enter the labor force. Chinese economy, which benefited and is still benefiting (but for not too long) from the 1970s babyboomers, however, will start to slow down because of the aging population .

However, young labor force can take its toll too. A study by Nir Jaimovich and Henry Siu shows that it is the “restless” workers that makes an economy volatile. Based on historical data from major industrial countries, they find that volatility of an economy is positively correlated with the share of young workers (15-29 years old) in the labor force.

To show you the result also graphically, below several charts from the paper are shown. The charts (please click for enlarged imanges) plot the business cycle volatility (the pink line) alongside with the “restless” worker ratio (the blue line) for the seven major industrial countries. The two statistics seem to track each other very well. History may not be a perfect guide, but the evidence collected by economists seems to suggest that demographics is a good predictor of economic volatility. So, Reserve Bank of India, watch out! Your inflation rate is too high!

The Young, the Old, and the Restless: Demographics and Business Cycle Volatility (PDF file)
We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding extent and timing differ from place to place. Using paneldata methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Using both simple accounting exercises and a quantitative general equilibrium model, we find that demographic change accounts for a significant part of this moderation.

Google's founders Larry Page and Sergey Brin earned salaries of just $1 a year.

I am curious whether this contract violates the minimum wage law? :-)

The $1 wage of Google's $14bn founding fathers (From the Guardian newspaper)
Google's founders Larry Page and Sergey Brin earned salaries of just $1 (50p) last year, documents have revealed.
The pair, who built up the internet giant from their dorm room at Stanford University in the late 1990s, drew only nominal wages from the company in 2006. Statements filed with the US securities and exchange commission show that Google's chief executive, Eric Schmidt, also took a salary of just $1.
It is the third year in a row that the trio have taken basic salaries. Their bank managers will be consoled, however, with the news that their shares are now worth five times more than when Google floated on the stock market two and a half years ago.