Impact of Demographic Change on the Composition of Consumption Expenditure: A Long-term Forecast

• Main Author: Kim, Dong seok
• Format: Article
• Language: English
• Published: Korea Development Institute 2006-12-01
• Series: KDI Journal of Economic Policy
• Subjects: 인구구조 변화(Demographic Change); 가계소비지출(Household Consumption Expenditure); QUAIDS 모형(QUAIDS Model); 도시가계조사(Household Income and Expenditure Survey)
• Online Access: https://doi.org/10.23895/kdijep.2005.28.2.1
• ISSN: 2586-2995; 2586-4130

Considering the fact that households' demographic characteristics affect consumption decision, it is conjectured that rapid demographic changes would lead to a substantial change in the composition of private consumption expenditure. This paper estimates the demand functions of various consumption items by applying the Quadratic Almost Ideal Demand System(QUAIDS) model to Household Income and Expenditure Survey data, and then provides a long-term forecast of the composition of household consumption expenditure for 2005-2020. The paper shows that Korea's consumption expenditure will maintain the recent years' rapid change, of which a considerable portion is due to rapid demographic changes. Results of the paper can be utilized in forecasting the change in the industrial structure of the economy, as well as in firms' investment planning.