DP14026 Population aging and structural transformation

Author(s): Javier Cravino, Andrei A. Levchenko, Marco Rojas
Publication Date: September 2019
Date Revised: May 2021
Keyword(s): aging, deindustrialization, structural transformation
JEL(s): E2, O1, O4
Programme Areas: International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14026

We quantify the role of population aging in the structural transformation process. Household-level data from the U.S. show that the fraction of expenditures devoted to services increases with household age. We use a shift-share decomposition and a quantitative model to show that U.S. population aging accounted for about a fifth of the observed increase in the service share in consumption between 1982 and 2016. The contribution of population aging to the rise in the service share is about the same size as the contribution of real income growth, and about half as large as that of changes in relative prices.