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Consumption and population age structure

  • Erlandsen, Solveig

    (Norges Bank)

  • Nymoen, Ragnar

    ()

    (Dept. of Economics, University of Oslo)

In this paper the effects 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 effects 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 effects 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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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2004/Memo-27-2004.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 27/2004.

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Length: 22 pages
Date of creation: 06 Apr 2005
Date of revision:
Handle: RePEc:hhs:osloec:2004_027
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  19. Jonathan A. Parker, 2000. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 317-387 National Bureau of Economic Research, Inc.
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  23. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-96, December.
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