Aging, the Great Moderation and Business-Cycle Volatility in a Life-Cycle Model

Burkhard Heer, Stefan Rohrbacher and Christian Scharrer

No 4584, CESifo Working Paper Series from CESifo

Abstract: According to empirical studies, the life cycle of labor supply volatility exhibits a U-shaped pattern. This may lead to the conclusion that demographic change induces a drop in output volatility. We present an overlapping generations model that replicates the empirically observed pattern and study the impact of demographic transition on output volatility. We find that the change in age-composition itself has only a marginal influence on output volatility as the mitigating effect of lower labor supply volatility is compensated by higher labor supply. Instead, the driving force behind the Great Moderation in our model is the downward shift of the age-specific labor supply volatility curve.

Keywords: business cycles; overlapping generations; demographics (search for similar items in EconPapers)
JEL-codes: C68 E32 J11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: AGING, THE GREAT MODERATION, AND BUSINESS-CYCLE VOLATILITY IN A LIFE-CYCLE MODEL (2017)
Working Paper: Aging, the Great Moderation and Business-Cycle Volatility in a Life-Cycle Model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4584

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