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The life-cycle hypothesis, fiscal policy and social security

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  • Tullio Jappelli

    ()
    (Università degli Studi di Salerno, Dipartimento di Scienze Economiche e Statistiche, Fisciano, Salerno (Italy))

Abstract

In the early 1950s Modigliani, with Brumberg and Ando, formulated the life-cycletheory of consumption and savings that enjoyed a huge and undisputed success. But, since the early 1980s, the life-cycle theory has increasingly come under attack. One reason is the existence of an important inter-generational transmission of wealth, to be imputed to motives that are exogenous to the life-cycle model. The second reason is the growing evidence that the rich continue to save more than the less fortunate, as Keynes in fact maintained. The third reason is that there is growing evidence that young families in their twenties and thirties save a positive and increasing proportion of their income, which is in sharp contrast with the original version of the life-cycletheory. Finally, a number of empirical works have found that pensioners set aside a high proportion of their income. This requires a rethinking of the life-cycle approach.

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Bibliographic Info

Article provided by Banca Nazionale del Lavoro in its journal Banca Nazionale del Lavoro Quarterly Review.

Volume (Year): 58 (2005)
Issue (Month): 233-234 ()
Pages: 173-186

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Handle: RePEc:psl:bnlqrr:2005:210

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Keywords: Consumption; Fiscal Policy; Life Cycle; Policy; Saving; Social Security; Wealth;

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  1. Modigliani, Franco, 1985. "Life Cycle, Individual Thrift and the Wealth of Nations," Nobel Prize in Economics documents 1985-1, Nobel Prize Committee.
  2. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  3. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  4. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
  5. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
  6. Modigliani, Franco & Sterling, Arlie, 1986. "Government Debt, Government Spending and Private Sector Behavior: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1168-79, December.
  7. Modigliani, Franco. & Sterling, Arlie., 1981. "Determinants of private saving with special reference to the role of social security : cross country tests," Working papers 1209-81., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. DREZE, Jacques H. & MODIGLIANI, Franco, . "Cosumption decisions under uncertainty," CORE Discussion Papers RP -119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Modigliani,Franco, 2011. "The Debate Over Stabilization Policy," Cambridge Books, Cambridge University Press, number 9780521189705, April.
  10. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  11. Feldstein, Martin S, 1976. "Social Security and Saving: The Extended Life Cycle Theory," American Economic Review, American Economic Association, vol. 66(2), pages 77-86, May.
  12. Rossi, Nicola & Visco, Ignazio, 1995. "National saving and social security in Italy," Ricerche Economiche, Elsevier, vol. 49(4), pages 329-356, December.
  13. Tullio Jappelli & Franco Modigliani, 1998. "The Age-Saving Profile and the Life-Cycle Hypothesis," CSEF Working Papers 09, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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Cited by:
  1. Luca Pieroni & David Aristei, 2006. "Regional Differences in Growth Rates: A Microdata Approach," ERSA conference papers ersa06p799, European Regional Science Association.

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