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Demographics, Fiscal Policy, and U.S. Saving in the 1980s and Beyond

In: Tax Policy and the Economy: Volume 4

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  • Alan J. Auerbach
  • Laurence J. Kotlikoff

Abstract

This paper focuses on U.S. saving, demographics, and fiscal policy. We use data from the Consumer Expenditure Surveys of the 1980s to consider the effect of demographic change on past and future U.S. saving rates. Our findings indicate that demographic change may significantly alter the U.S. rate of national saving and current account position over the next 50 years. The gradual aging of the population is predicted to lead to higher saving rates over the next three decades with declines in the rate of saving thereafter. Associated with these predicted saving rate changes is a predicted improvement in the U.S. current account position is the 1990s, with a very gradual deterioration during the subsequent decades. While demographics is a potentially very important factor in explaining saving, it does not appear to explain the drop in the U.S. saving rate in the 1980s. What happened to U.S. saving in the 1980s remains an intriguing puzzle.

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This chapter was published in:

  • Lawrence H. Summers, 1990. "Tax Policy and the Economy: Volume 4," NBER Books, National Bureau of Economic Research, Inc, number summ90-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11573.

    Handle: RePEc:nbr:nberch:11573

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    1. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
    2. Chris Carroll & Lawrence H. Summers, 1989. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Working Papers 3090, National Bureau of Economic Research, Inc.
    3. James M. Poterba & Lawrence H. Summers, 1986. "Finite Lifetimes and the Effects of Budget Deficits on National Savings," Working papers 434, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-49, Part I, M.
    5. Alan J. Auerbach & Kevin Hassett, 1989. "Corporate Savings and Shareholder Consumption," NBER Working Papers 2994, National Bureau of Economic Research, Inc.
    6. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
    7. Alan J. Auerbach & Laurence J. Kotlikoff & Robert Hagemann & Giuseppe Nicoletti, 1989. "The Dynamics of an Aging Population: The Case of Four OECD Countries," NBER Working Papers 2797, National Bureau of Economic Research, Inc.
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