‘Getting Old': The Impact of the Elderly on Inflation Rates in Developed Countries

What explains variation in inflation rates across countries? Previous literature has focused mostly on ideas and institutions. This paper shows that electoral politics also matters by analysing the demographic  determinants of inflation. Specifically, I argue that countries with a larger share of elderly exhibit lower inflation because older people are both more inflation averse and politically powerful, forcing governments to pursue lower inflation. I test my argument  in three steps. First, logistic regression analysis of survey data confirms older people are more inflation averse. Second, panel data regression analysis of party manifesto data reveals that European countries with more old people have more economically orthodox  political parties. Third, panel regression analysis demonstrates that the share of the elderly is negatively correlated with inflation in both a sample of 21 advanced OECD economies and a larger sample of 175 countries. Ageing may therefore push governments  to adopt a low inflation regime.