Relative Sectoral Prices and Population Ageing: A Common Trend

37 Pages Posted: 25 Feb 2014

See all articles by Max Groneck

Max Groneck

Stockholm School of Economics, Department of Economics

Christoph Kaufmann

University of Cologne

Date Written: January 17, 2014

Abstract

Demographic change raises demand for non-tradable old-age related services relative to tradable commodities. This demand shift increases the relative price of non-tradables and thereby causes real exchange rates to appreciate. We claim that the change in demand a¤ects prices via imperfect intersectoral factor mobility. Using a sample of 15 OECD countries between 1970 and 2009, we estimate a robust increase of relative prices due to population ageing. Further findings confirm the relevance of imperfect factor mobility: Countries with more rigid labour markets experience stronger price effects.

Keywords: demographic change, relative price of non-tradables, real exchange rate

JEL Classification: J11, F41, E39

Suggested Citation

Groneck, Max and Kaufmann, Christoph, Relative Sectoral Prices and Population Ageing: A Common Trend (January 17, 2014). Netspar Discussion Paper No. 01/2014-002, Available at SSRN: https://ssrn.com/abstract=2400389 or http://dx.doi.org/10.2139/ssrn.2400389

Max Groneck (Contact Author)

Stockholm School of Economics, Department of Economics ( email )

Germany

HOME PAGE: http://https://www.hhs.se/en/Research/Departments/DE/

Christoph Kaufmann

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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