[2022-2] Life-cycle Consumption in an Aging Economy : the Case of Korea

구분
Articles in Monthly Bulletin
등록일
2022.04.01
조회수
15667
키워드
life-cycle consumption aging economy Korea population aging
담당부서
Research Department (02-759-4150)


This paper estimates the changes in the life-cycle profiles of consumption due to changes in age-specific death ratesone of the most important causes of population aging. Household Income and Expenditure Survey data is used for the estimation. The results show that consumers choose lower levels of non-durable consumption as age-specific death rates decrease, suggesting that they substitute current consumption with future consumption in response to increased life expectancy. While these consumption decreases are observed in overall ages, they appear notably large at ages close to retirement, approximately after the age of 50. A historical simulation based on the estimation results and changes in age distribution between 1995 and 2016 suggests that aggregate per capita consumption decreased constantly, by an annual average of 0.9%. Both the changes in individual consumption due to lowered age-specific death rates and the changes in age distribution due to population aging played an important role in these per capita consumption decreases. Prediction results suggest that per capita consumption may decrease further until mid-2030, and that the individual consumption modification will emerge as the main channel while the changes in age distribution will work in the opposite direction with the past.

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