Steven Lugauer

Estimating the Effect of the Age Distribution on Cyclical Output Volatility Across the United States

I exploit the variation in demographic change across the United States to estimate the relationship between the age distribution in the population and the magnitude of cyclical output volatility. According to panel regression estimates, the relative supply of young workers, or youth share, has a statistically significant effect on the volatility of state-by-state GDP. Moreover, changes to the age distribution can account for up to 58% of the recent reduction in business cycle fluctuations, indicating a critical link between the youth share and output volatility.

Demographic Change and the Great Moderation in an Overlapping Generations Model with Matching Frictions

The fraction of the labor force under the age of 35, or youth share, has been correlated with cyclical GDP volatility over the past several decades. The youth share and business cycle fluctuations were high during the 1970’s. Then, as the population aged, output volatility declined. I develop an overlapping generations model featuring search frictions and productivity shocks, in which the age distribution affects cyclical volatility through two channels. First, employment for younger workers fluctuates more, creating a simple composition effect. Second, inexperienced workers produce less, so firms decide how many jobs to create based on the age distribution. Young job searchers do not necessarily induce firms to post new vacancies. Both this endogenous response by firms and the composition effect increase aggregate volatility when the population has a high youth share. The model can replicate a large portion of the moderation over the past two decades, suggesting an important role for demographics in determining the magnitude of output volatility.

The Role of Household Saving in the Economic Rise of China

We estimate the age distributions impact on carbon dioxide emissions from 1990 to 2006 by exploiting demographic variation in a panel of 46 countries. To eliminate potential bias from endogeneity or omitted variables, we instrument for the age distribution with lagged birth rates, and the regressions control for total population, output, and country and year fixed effects. The increase in the share of the population aged 35 to 49 accounts for a large portion of the observed increase in carbon dioxide emissions.

The Age Distribution and Business Cycle Volatility: International Evidence

We estimate the age distribution’s effect on business cycle fluctuations across a large number of countries. A 10 percentage point increase in the middle-aged share of the population decreases output volatility by 15 percent for the average country.

Is Fertility a Leading Economic Indicator

Many papers show that aggregate fertility is pro-cyclical over the business cycle. In this paper we do something else: using data on more than 100 million births and focusing on within-year changes in fertility, we show that for recent recessions in the United States, the growth rate for conceptions begins to fall several quarters prior to economic decline. Our findings suggest that fertility behavior is more forward-looking and sensitive to changes in short-run expectations about the economy than previously thought.