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Do Wealthier Households Save More?: The Impact of the Demographic Factor

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  • Ansgar Belke
  • Christian Dreger
  • Richard Ochmann

Abstract

This paper investigates the relationship between wealth, ageing and saving behaviour of private households by using pooled cross sections of German consumption survey data. Different components of wealth are distinguished, as their impact on the savings rate is not homogeneous. On average, the effect attributed to real estate dominates the other components of wealth. In addition, the savings rate strongly responds to demographic trends. Besides the direct impact of the age structure, an indirect effect arises through the accumulation of wealth. The savings rate does not decrease with age in a monotonic way, as the permanent income hypothesis suggests. Most prominently, older households tend to increase their savings in the second half of their retirement period, probably due to bequest motives and increasing immobility. Given the ongoing demographic trend, an increase of 1.4 percentage points in the aggregated savings rate should be expected over the next two decades.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.399903.de/dp1211.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1211.

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Length: 20 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwwpp:dp1211

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Keywords: Savings; wealth; demographic change;

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References

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  1. John Geanakoplos & Michael Magill & Martine Quinzii, 2002. "Demography and the Long-run Predictability of the Stock Market," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1380R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2004.
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Cited by:
  1. Ansgar Belke, 2013. "Impact of a Low Interest Rate Environment – Global Liquidity Spillovers and the Search-for-yield," ROME Working Papers, ROME Network 201305, ROME Network.

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