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In the literature on secular stagnation, demographic aging is widely blamed for lowering the IS curve of aggregate demand and therefore the natural interest rate. However, very little is said about the im-pact of workforce aging on long-term aggregate supply, or so-called potential GDP. To fill this gap, this study delves into the effects of workforce aging on two key components of the remarkably sluggish po-tential GDP growth of developed countries: hours worked and labour productivity. First, using a novel macro-accounting decomposition of EU-KLEMS data, we find that old-labour input has the highest con-tribution to growth, through both increased hours worked and shifts in labour composition in the EU, US and Japan. Second, we use panel stochastic frontier models highlighting that, however, old workers have an adverse effect on labour productivity growth frontier—though in-creasing technical efficiency, i.e., reducing the distance to this frontier.
