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Estimating the Effect of the Age Distribution on Cyclical Output Volatility Across the United States

  • Steven Lugauer

    (University of Notre Dame)

I exploit the variation in demographic change across the United States to estimate the relationship between the age distribution in the population and the magnitude of cyclical output volatility. According to panel regression estimates, the relative supply of young workers, or youth share, has a statistically significant effect on the volatility of state-by-state GDP. Moreover, changes to the age distribution can account for up to 58% of the recent reduction in business cycle fluctuations, indicating a critical link between the youth share and output volatility. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 4 (November)
Pages: 896-902

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Handle: RePEc:tpr:restat:v:94:y:2012:i:4:p:896-902
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  1. Nir Jaimovich & Henry E. Siu, 2008. "The Young, the Old, and the Restless: Demographics and Business Cycle Volatility," NBER Working Papers 14063, National Bureau of Economic Research, Inc.
  2. CASTRO, Rui & COEN-PIRANI, Daniele, 2005. "Why Have Aggregate Skilled Hours Become So Cyclical Since the Mid-1980's?," Cahiers de recherche 2005-19, Universite de Montreal, Departement de sciences economiques.
  3. Nir Jaimovich & Seth Pruitt & Henry E. Siu, 2009. "The Demand for Youth: Implications for the Hours Volatility Puzzle," NBER Working Papers 14697, National Bureau of Economic Research, Inc.
  4. Steven J. Davis & James A. Kahn, 2008. "Interpreting the Great Moderation: changes in the volatility of economic activity at the macro and micro Levels," Staff Reports 334, Federal Reserve Bank of New York.
  5. Paul Gomme & Richard Rogerson & Peter Rupert & Randall Wright, 2004. "The business cycle and the life cycle," Working Paper 0404, Federal Reserve Bank of Cleveland.
  6. Lugauer, Steven, 2012. "Demographic Change And The Great Moderation In An Overlapping Generations Model With Matching Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 16(05), pages 706-731, November.
  7. Robert Shimer, 1999. "The Impact of Young Workers on the Aggregate Labor Market," NBER Working Papers 7306, National Bureau of Economic Research, Inc.
  8. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  9. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
  10. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  11. Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 465-89, July.
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