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Consumption and population age structure

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  • Erlandsen, Solveig

    (Norges Bank)

  • Nymoen, Ragnar

    ()
    (Dept. of Economics, University of Oslo)

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.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 27/2004.

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Length: 22 pages
Date of creation: 06 Apr 2005
Date of revision:
Handle: RePEc:hhs:osloec:2004_027

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: Consumption; demography; savings; time series models; cointegration.;

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Cited by:
  1. 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.
  2. Jochen Mierau & Stephen Turnovsky, 2014. "Capital accumulation and the sources of demographic change," Journal of Population Economics, Springer, vol. 27(3), pages 857-894, July.
  3. Eilev S. Jansen, 2010. "Wealth effects on consumption in financial crises: the case of Norway," Discussion Papers 616, Research Department of Statistics Norway.
  4. Solveig Erlandsen & Ragnar Nymoen, 2008. "Consumption and population age structure," Journal of Population Economics, Springer, vol. 21(3), pages 505-520, July.

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