Abstract
Intersecting the life-cycle pattern of savings accumulation with the wealth distribution, this paper studies the impact of heterogeneity in cohort size on the allocation of assets held by private households. Based on a closed form solution to a theoretical model, the results do not lend support to the hypothesis that stock markets are doomed to suffer from a meltdown as the baby-boom cohort retires. Instead, various demographic and economic factors may contribute to attenuate an expected stock market decline. Depending on the shape of the aggregate wealth distribution, the allegedly negative stock market impact of population ageing may even be offset or reversed. On the other hand, contrary to previous work a decline in stock market prices may set in well before collective retirement.
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