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The Impact of Later Retirement Ages on Aggregate Household Savings and Saving Rates: An Analysis of OECD Countries

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  • Aylit Tina Romm
  • Martha Wolny
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    Abstract

    As a result of population aging, governments of many OECD countries have begun to implement policies to increase average retirement ages in an attempt to alleviate some of the Â…nancial strain in supporting retirees. This paper explores the effect that later retirement ages have on aggregate household saving rates, both on a theoretical and empirical level. Using a two-wave panel of OECD countries, the results show that later retirement ages have the effect of decreasing aggregate household saving rates. We show that it is likely that this corresponds to a decrease in household saving. In addition, it appears that it is increases in female retirement ages that is driving this result.

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    Bibliographic Info

    Paper provided by Economic Research Southern Africa in its series Working Papers with number 269.

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    Length: 27 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:rza:wpaper:269

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    Keywords: retirement age; saving; life-cycle model;

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    References

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    1. Hongbin Li & Junsen Zhang & Jie Zhang, . "Effects of longevity and dependency rates on saving and growth: Evidence from a panel of cross countries," MRG Discussion Paper Series 1106, School of Economics, University of Queensland, Australia.
    2. An, Chong-Bum & Jeon, Seung-Hoon, 2006. "Demographic change and economic growth: An inverted-U shape relationship," Economics Letters, Elsevier, vol. 92(3), pages 447-454, September.
    3. David M. Blau & Ryan M. Goodstein, 2010. "Can Social Security Explain Trends in Labor Force Participation of Older Men in the United States?," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    4. Eytan Sheshinski, 2005. "Longevity and Aggregate Savings," Discussion Paper Series dp403, The Center for the Study of Rationality, Hebrew University, Jerusalem.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, June.
    6. Eytan Sheshinski, 2006. "Note on Longevity and Aggregate Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 353-356, 07.
    7. Leff, Nathaniel H, 1971. "Dependency Rates and Savings Rates: Reply," American Economic Review, American Economic Association, vol. 61(3), pages 476-80, June.
    8. Ram, Rati, 1982. "Dependency Rates and Aggregate Savings: A New International Cross-Section Study," American Economic Review, American Economic Association, vol. 72(3), pages 537-44, June.
    9. Goldberger, Arthur S, 1973. "Dependency Rates and Savings Rates: Further Comment," American Economic Review, American Economic Association, vol. 63(1), pages 232-33, March.
    10. Robert M. Schmidt & Allen C. Kelley, 1996. "Saving, dependency and development," Journal of Population Economics, Springer, vol. 9(4), pages 365-386.
    11. Aylit Tina Romm, 2012. "Retirement Date Effects on Pre-Retirement Wealth Accumulation: An Analysis of US Households," Working Papers 266, Economic Research Southern Africa.
    12. David E. Bloom & David Canning & Bryan Graham, 2002. "Longevity and Life Cycle Savings," NBER Working Papers 8808, National Bureau of Economic Research, Inc.
    13. Andrew Mason & Tomoko Kinugasa, 2005. "Why Nations Become Wealthy: The Effects of Adult Longevity on Saving," Working Papers 200514, University of Hawaii at Manoa, Department of Economics.
    14. Gupta, Kanhaya L, 1971. "Dependency Rates and Savings Rates: Comment," American Economic Review, American Economic Association, vol. 61(3), pages 469-71, June.
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