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Consumption and population age structure

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Author Info

  • Solveig K. Erlandsen

    (Norges Bank)

  • Ragnar Nymoen

    (University of Oslo)

Abstract

In this paper the e ects 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 e ects 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 e ects 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.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2004/22.

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Length: 19 pages
Date of creation: 26 Nov 2004
Date of revision:
Handle: RePEc:bno:worpap:2004_22

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Keywords: Consumption; demography; savings; time series models; cointegration;

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References

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Citations

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Cited by:
  1. Solveig K. Erlandsen & Ragnar Nymoen, 2004. "Consumption and population age structure," Working Paper 2004/22, Norges Bank.
  2. Eilev S. Jansen, 2010. "Wealth effects on consumption in financial crises: the case of Norway," Discussion Papers 616, Research Department of Statistics Norway.
  3. Delphine Bassilière & Didier Baudewyns & Francis Bossier & Ingrid Bracke & Igor Lebrun & Peter Stockman & Peter Willemé, 2013. "Working Paper 13-13 - A new version of the HERMES model - HERMES III," Working Papers 1313, Federal Planning Bureau, Belgium.

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