Consumption Structure Evolutions in an Aging Society and Implications for the Social Security System

Chinafs social security system sees a critical challenge with the rapidly aging population. This paper assesses the heterogeneous effects of population aging on personal budget allocation across domestic expenditure categories. With Chinafs household survey data, we break down each component of a household expenditure to its constituent members. We find consistent and robust age profiles of the composition of personal consumption expenditures. Incorporating the estimated results with the population forecast data, we predict that the shares of food, household facilities, articles and services, health care and medical services, and residence in domestic consumption tend to rise, whereas the shares of clothing, transportation and communication, education, culture and recreation services, and miscellaneous goods and services tend to fall in the near future. The evolution of Chinafs domestic consumption structure along with its demographic change have important implications to the sustainability issue of its social security system.