Effects of the Demographic Changes on Private Consumption: An Almost Ideal Demand System Analysis for Austria

Abstract: The following paper analyzes potential effects of the demographic changes on private consumption. An extended Almost Ideal Demand System is used to simulate changes in the consumption of goods and services due to the ageing of the population in Austria – on national as well as regional level. Therefore, age-specific income elasticity and price elasticity are estimated. The estimated model is used to simulate the consumption structure in 2030 for four scenarios: Firstly, only the ageing process of the population is considered. Secondly, the ageing as well as changes in household structure are taken into account. Scenario three and four furthermore consider potential changes in income distribution due to the ageing as well as price changes and its effects on the consumption structure of the ageing society. The results reveal direct positive effects of the ageing of the population on the consumption shares of food and non-alcoholic beverages, housing, water and fuel, health, as well as miscellaneous goods and services, while the consumption category transport looses the highest proportion in total consumption. But it can also be seen that these results do not hold anymore as soon as potential changes in income distribution – as indirect effect of the ageing – are considered.