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Rate of Growth of Population, Saving and Wealth in the Basic Life-cycle Model when the Household is the Decision Unit

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Author Info
Carlo Casarosa () (Università di Pisa)
Luca Spataro () (Università di Pisa and CHILD)

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Abstract

In this paper we explore the impact of the life-cycle dynamics of family composition on the aggregate wealth-income ratio and on the aggregate propensity to save in the hypothesis of life-cycle behaviour. We depart from Modigliani-Brumberg’s basic model by assuming that the household, rather than the individual, is the relevant economic unit. In this framework we first explore the single household’s life-cycle paths of consumption, saving and wealth and point out the impact on such paths of the timing of births and of the rearing period of the children. We then show that both in a stationary economy and in economy with a steadily growing population the life-cycle dynamics of family composition affects strongly the aggregate wealth-income ratio and the distribution of wealth among the age-cohorts. Further and more importantly, we show that in an economy with a steadily growing population the aggregate propensity to save and the rate of growth of population move in opposite directions for a wide range of values of the timing of births and of the number of children per-household.

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Publisher Info
Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 64.

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Length: 24 pages
Date of creation: Oct 2007
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Handle: RePEc:crp:wpaper:64

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Related research
Keywords: Life-Cycle; Saving; Timing of Births; Population Growth;

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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