Ageing and the Relative Price of Nontradeables

TI Discussion Paper No. 07-064/2

33 Pages Posted: 29 Aug 2007

See all articles by Leon J.H. Bettendorf

Leon J.H. Bettendorf

Erasmus University Rotterdam (EUR)

Hans Dewachter

Catholic University of Leuven (KUL) - Department of Economics; Erasmus Research Institute of Management (ERIM)

Date Written: August 2007

Abstract

In this paper we identify the effects of ageing on the relative price of nontradeables versus tradeables. We consider two cases. In a first specification, age effects only account for short-run dynamics. An alternative case allows for permanent age effects. Estimating the respective cases by means of an ECM on a panel of OECD countries we find significant effects of demographic composition on the relative prices, even after correcting for the standard explanatory variables. Simulations based on population projections of the UN show that ageing might substantially contribute to inflationary pressures in the near future.

Keywords: relative price of nontradeables, age-specific effects, productivity differentials

JEL Classification: F41, E31, J11

Suggested Citation

Bettendorf, Leon J.H. and Dewachter, Hans, Ageing and the Relative Price of Nontradeables (August 2007). TI Discussion Paper No. 07-064/2, Available at SSRN: https://ssrn.com/abstract=1010561 or http://dx.doi.org/10.2139/ssrn.1010561

Leon J.H. Bettendorf (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 4081808 (Phone)

Hans Dewachter

Catholic University of Leuven (KUL) - Department of Economics ( email )

Center for Economic Studies
Naamsestraat 69
Leuven, B-3000
Belgium
+0032 16 326859 (Phone)
+0032 16 326796 (Fax)

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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