Saving in an ageing society with public pensions: implications from lifecycle analysis
AbstractThis 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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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 370.
Length: 31 pages
Date of creation: Mar 2009
Date of revision:
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Saving in an ageing society with public pensions: implications from lifestyle analysis; population ageing; public pensions; private and public saving; Oksanen;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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- H6 - Public Economics - - National Budget, Deficit, and Debt
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