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

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  • Steven Lugauer

    (University of Notre Dame)

Abstract

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.

Suggested Citation

  • Steven Lugauer, 2012. "Estimating the Effect of the Age Distribution on Cyclical Output Volatility Across the United States," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 896-902, November.
    • Handle: RePEc:tpr:restat:v:94:y:2012:i:4:p:896-902
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    References listed on IDEAS

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    8. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230, National Bureau of Economic Research, Inc.
    9. Lugauer, Steven, 2012. "Demographic Change And The Great Moderation In An Overlapping Generations Model With Matching Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 16(5), pages 706-731, November.
    10. Paul Gomme & Richard Rogerson & Peter Rupert & Randall Wright, 2005. "The Business Cycle and the Life Cycle," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 415-592, National Bureau of Economic Research, Inc.
    11. Nir Jaimovich & Henry E. Siu, 2009. "The Young, the Old, and the Restless: Demographics and Business Cycle Volatility," American Economic Review, American Economic Association, vol. 99(3), pages 804-826, June.
    12. 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.
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    Cited by:

    1. Martin Iseringhausen & Hauke Vierke, 2019. "What Drives Output Volatility? The Role of Demographics and Government Size Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(4), pages 849-867, August.
    2. Gerdie Everaert & Hauke Vierke, 2016. "Demographics and Business Cycle Volatility: A Spurious Relationship?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1467-1477, November.
    3. Mennuni, Alessandro, 2019. "The aggregate implications of changes in the labour force composition," European Economic Review, Elsevier, vol. 116(C), pages 83-106.
    4. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 58-94, April.
    5. Lugauer, Steven, 2012. "Demographic Change And The Great Moderation In An Overlapping Generations Model With Matching Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 16(5), pages 706-731, November.
    6. Benjamin Wild Pugsley & Ay’egul ahin, 2019. "Grown-up Business Cycles," The Review of Financial Studies, Society for Financial Studies, vol. 32(3), pages 1102-1147.
    7. Heer, Burkhard & Rohrbacher, Stefan & Scharrer, Christian, 2017. "Aging, The Great Moderation, And Business-Cycle Volatility In A Life-Cycle Model," Macroeconomic Dynamics, Cambridge University Press, vol. 21(2), pages 362-383, March.
    8. Jedwab,Remi Camille & Pereira,Daniel & Roberts,Mark, 2019. "Cities of Workers, Children, or Seniors? Age Structure and Economic Growth in a Global Cross-Section of Cities," Policy Research Working Paper Series 9040, The World Bank.
    9. Kasey Buckles & Daniel Hungerman & Steven Lugauer, 2021. "Is Fertility a Leading Economic Indicator?," The Economic Journal, Royal Economic Society, vol. 131(634), pages 541-565.
    10. Zhang, Haifeng & Zhang, Hongliang & Zhang, Junsen, 2015. "Demographic age structure and economic development: Evidence from Chinese provinces," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 170-185.
    11. Cao, Huoqing & Chen, Shiyi & Xi, Xican, 2023. "Aging, migration, and structural transformation in China," Economic Modelling, Elsevier, vol. 126(C).
    12. Steven Lugauer & Richard Jensen & Clayton Sadler, 2014. "An Estimate Of The Age Distribution'S Effect On Carbon Dioxide Emissions," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 914-929, April.
    13. Mennuni, Alessandro, 2013. "Labor Force Composition and Aggregate Fluctuations," Discussion Paper Series In Economics And Econometrics 1302, Economics Division, School of Social Sciences, University of Southampton.
    14. Steven Lugauer, 2012. "The Supply of Skills in the Labor Force and Aggregate Output Volatility," Working Papers 005, University of Notre Dame, Department of Economics, revised Jun 2012.
    15. Lugauer, Steven & Redmond, Michael, 2012. "The age distribution and business cycle volatility: International evidence," Economics Letters, Elsevier, vol. 117(3), pages 694-696.

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    More about this item

    Keywords

    age distribution; business cycles; demographics; United States;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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    1. Estimating the effect of the age distribution on cyclical output volatility across the United States (REStat 2012) in ReplicationWiki

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