Solveig Erlandsen and Ragnar Nymoen
Consumption and population age structure
Abstract: In this paper the effects on aggregate consumption of
changes in the age distribution of the population are analysed empirically.
Economic theories predict that age influences individuals’ saving and
consumption behaviour. Despite this, age structure effects are rarely
controlled for in empirical consumption functions. Our findings suggest
that they should. By analysing Norwegian quarterly time series data we find
that changes in the age distribution of the population have significant and
life cycle consistent effects on aggregate consumption. Furthermore,
controlling for age structure effects stabilizes the other parameters of
the consumption function and reveals significant real interest rate
effects. Simulation experiments show that the numerical effect on the
savings rate of age structure changes is substantial when the indirect
effects via wealth and income are accounted for.
Keywords: Consumption; demography; savings; time series models; cointegration.; (follow links to similar papers)
JEL-Codes: C51; C53; E21; J10; (follow links to similar papers)
22 pages, April 6, 2005
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