Age, period, and cohort effects

What is the APC identification problem?

The book Generations by Bobby Duffy (KCL) highlights the import of generational thinking. All changes over time in attitudes, beliefs, and behaviour separate into three effects:

• Age effects: People change as they age, due to biological and social reasons. For example, life events like retirement can affect people. The book refers to these as ‘lifecycle effects’.
• Period effects: The change occurs in a consistent manner across all age groups. These effects are often a response to major events which affect everyone, like a pandemic or war.
• Cohort effects: Generations differ due to their starting conditions. Those cohorts remain distinct even as they age. This is often shown in a step-change between generations.

There are different definitions for generational cohorts. (Image: KCL)

Every change is expressible through the combination of these three effects. Many simple stories assume when someone is born gives a total explanation.

The identification problem

Imagine we wanted to build a model splitting out those three effects: age, period, and cohort. If we know someone’s age and the year, then we know which cohort they were born in. Having two bits of information gives the third. In statistical terms, the problem is the effects…