The impact of age structure on consumption in Canada

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University of New Brunswick


Although Canada is the fastest growing population in the G7 countries, it continues to face the same problems as many other countries - decreasing birth and mortality rates. Economic theories predict that age influences individuals’ saving and consumption behaviors. Existing studies found that there was a U-shaped relationship between consumption and age in the United State, consistent with the life-cycle hypothesis. In this MA report, we investigate the relationship between population age structure and aggregate consumption using a province-level panel data set from 1983 to 2015 for Canada. Results show that while the impacts of age structure on the consumption of nondurable goods and service are insignificant, the impacts on consumption of durable goods are significant. Furthermore, consistent with the literature, prime age people consume less than younger and old people do.