Life-Cycle Dynamics of Consumption Preferences

This study investigates the dynamic impact of population aging on consumption preferences in China, a critical area given consumption’s role in global economic growth and the country’s accelerating demographic shifts. Utilizing pooled panel data from the 2015, 2017, and 2019 China Household Finance Survey (CHFS) and employing the Target Group Index (TGI) to quantify preferences, we construct a micro-econometric model incorporating quadratic age terms and various control variables. Our findings reveal a robust U-shaped relationship between age and consumption preferences for both subsistence and developmental consumption, indicating a decline in preference during middle age followed by a resurgence in later life. We further identify significant heterogeneity: gender moderates this relationship, with elderly women showing a greater preference for subsistence consumption and different inflection points for developmental consumption. Higher income intensifies the age-preference link for subsistence goods, while middle-aged individuals exhibit stronger developmental preferences. Moreover, an increased number of properties intensifies age’s impact on consumption preferences across both categories. Regional analyses also show diverse patterns, though all seven cultural regions consistently exhibit a U-shaped trend. Contrary to conventional views of low consumption among the elderly, our results suggest that population aging may positively influence overall consumption, offering crucial empirical insights for policy formulation in aging societies.