Population aging and innovation slowdown: Dual mechanisms of firm cost structure and consumption preference

Abstract

This study examines the impact of population aging on innovation activities in China, broadening the discussion of aging’s socioeconomic outcomes. Using an integrated dataset spanning 2005–2021, we find that aging significantly decreases the number of patent applications per capita. The negative impact of aging is derived from supply- and demand-side mechanisms. The supply-side mechanism suggests that rising labor costs reduce firms’ R&D investment. Meanwhile, the demand-side mechanism suggests a decline in demand for novel products and a growing preference among the older adults for less-innovative service goods. Further analysis suggests that openness to trade and the adoption of artificial intelligence can mitigate the negative impact of aging. Our findings provide policy direction for sustaining economic growth within the context of an aging society.