What Determines Savings?
AbstractWhat determines savings? The question is timely and important. The U.S. saving rate is less than half that of Japan, Germany, and other developed countries, and the imbalance in saving rates across countries is responsible, in large part for the imbalance in international trade. This book examines a number of important determinants of wealth accumulation, including retirement bequests, and precautionary saving motives, demographics, the tax structure, social security, and insurance institutions. Using a blend of theory, empirical research and simulation methods, it reaches some surprising conclusions about what determines savings. Kotlikoff notes that most of U.S. wealth is due not to life cycle saving for retirement but rather to bequests and other intergenerational transfers. The process of passing wealth from one generation to the next may be explained, in large part, because of imperfect annuity arrangements. In addition to life span uncertainty, the author points out other types of uncertainty such as uncertainty about future medical expenditures can greatly stimulate saving. Fiscal policies, such as unfunded social security, can dramatically alter a country's wealth, although the process can take many years. Unfortunately, Kotlikoff observes, official fiscal deficits are intrinsically unreliable for measuring the government's stance of fiscal policy. He also concludes that the baby busts currently underway in the United States, Europe, and Japan are likely to improve overall economic welfare despite their detrimental impacts on social security systems
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Bibliographic InfoThis book is provided by The MIT Press in its series MIT Press Books with number 0262611872 and published in 1989.
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U.S. savings; wealth accumulation;
Find related papers by JEL classification:
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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- Fwu-Ranq Chang, 2001.
"Life Insurance, Precautionary Saving and Contingent Bequest,"
CESifo Working Paper Series
444, CESifo Group Munich.
- Chang, Fwu-Ranq, 2004. "Life insurance, precautionary saving and contingent bequest," Mathematical Social Sciences, Elsevier, vol. 48(1), pages 55-67, July.
- Canova, Luigina & Rattazzi, Anna Maria Manganelli & Webley, Paul, 2005. "The hierarchical structure of saving motives," Journal of Economic Psychology, Elsevier, vol. 26(1), pages 21-34, February.
- Marcus Klemm, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 0380, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Dobrescu, Loretti I. & Kotlikoff, Laurence J. & Motta, Alberto, 2012.
"Why aren't developed countries saving?,"
European Economic Review,
Elsevier, vol. 56(6), pages 1261-1275.
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