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Consumption and population age structure

Author

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  • Solveig K. Erlandsen

    (Norges Bank)

  • Ragnar Nymoen

    (University of Oslo)

Abstract

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.

Suggested Citation

  • Solveig K. Erlandsen & Ragnar Nymoen, 2004. "Consumption and population age structure," Working Paper 2004/22, Norges Bank.
  • Handle: RePEc:bno:worpap:2004_22
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    References listed on IDEAS

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    2. Han, Xuehui & Cheng, Yuan, 2020. "Consumption- and productivity-adjusted dependency ratio with household structure heterogeneity in China," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    3. Britta Stoever, 2013. "The power of elderly consumers – how demographic change affects the economy through private household demand in Germany," EcoMod2013 5147, EcoMod.
    4. Rami Ben HAJ-KACEM, 2015. "The Impact of Age Distribution on Household Consumption: Evidence from Saudi Arabia," Turkish Economic Review, KSP Journals, vol. 2(4), pages 277-304, December.
    5. Lei He & Shuyi Zhou & Zilan Liu, 2020. "How is aggregate household consumption affected jointly by longevity, pension, and aging? Theory and evidence," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(4), pages 499-512, December.
    6. 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.
    7. Britta Stoever, 2012. "The Influence of Age on Consumption," EcoMod2012 3808, EcoMod.
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    9. Jochen Mierau & Stephen Turnovsky, 2014. "Capital accumulation and the sources of demographic change," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 857-894, July.
    10. Michael Kuhn & Klaus Prettner, 2018. "Population age structure and consumption growth: evidence from National Transfer Accounts," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(1), pages 135-153, January.
    11. Chen, Quanrun & Dietzenbacher, Erik & Los, Bart & Yang, Cuihong, 2016. "Modeling the short-run effect of fiscal stimuli on GDP: A new semi-closed input–output model," Economic Modelling, Elsevier, vol. 58(C), pages 52-63.
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    13. Amoako, Samuel & Andoh, Francis Kwaw & Asmah, Emmanuel Ekow, 2023. "Household structure and electricity consumption in Ghana," Energy Policy, Elsevier, vol. 182(C).
    14. Lei He & Shuyi Zhou & Zilan Liu, 0. "How is aggregate household consumption affected jointly by longevity, pension, and aging? Theory and evidence," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 0, pages 1-14.
    15. Ran Yu & Zhangchi Wang & Yan Li & Zuhui Wen & Weijia Wang, 2023. "Does Population Aging Affect Carbon Emission Intensity by Regulating Labor Allocation?," Sustainability, MDPI, vol. 15(12), pages 1-19, June.
    16. Eilev Jansen, 2013. "Wealth effects on consumption in financial crises: the case of Norway," Empirical Economics, Springer, vol. 45(2), pages 873-904, October.
    17. Xuehui Han & Yuan Cheng, 2017. "Consumption- and Productivity-Adjusted Dependency Ratio with Household Structure Heterogeneity," Working Papers id:12339, eSocialSciences.
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    More about this item

    Keywords

    Consumption; demography; savings; time series models; cointegration;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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