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Consumption and population age structure

  • Solveig K. Erlandsen

    (Norges Bank)

  • Ragnar Nymoen

    (University of Oslo)

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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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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  16. Ohtake, F. & Horioka, C.Y., 1995. "Saving Motives in Japan," ISER Discussion Paper 0392, Institute of Social and Economic Research, Osaka University.
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