Population Aging and Structural Transformation

We quantify the role of population aging in the structural transformation process. Household-level data from the United States 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 US 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. (JEL D12, E21, E23, J11, J14)