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Saving in an ageing society with public pensions: implications from lifecycle analysis

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  • Heikki Oksanen
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    Abstract

    This paper studies saving in an economy where decline in fertility to a permanently lower level and increasing longevity are changing the age structure permanently and where the public pension system helps to smooth consumption over a lifetime of working and retirement. A simple overlapping generations (OLG) model is used for simulations, with the emphasis on the transition path. It is shown that, under plausible assumptions, the effect of population ageing on the capital to income ratio is positive and also that the saving rate increases in the first two to three decades. This first positive effect on the saving rate is highlighted and contrasted with results in previous literature. It is also shown that moving from a pure PAYG pension system to partial funding of mandatory pensions affects saving positively and has implications for intergenerational equity.

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    File URL: http://ec.europa.eu/economy_finance/publications/publication14320_en.pdf
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    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 370.

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    Length: 31 pages
    Date of creation: Mar 2009
    Date of revision:
    Handle: RePEc:euf:ecopap:0370

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    Related research

    Keywords: Saving in an ageing society with public pensions: implications from lifestyle analysis; population ageing; public pensions; private and public saving; Oksanen;

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    Cited by:
    1. Ghizlan Loumrhari, 2014. "Ageing, Longevity and Savings: The Case of Morocco," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 344-352.

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