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Time constraints, saving and old age

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  • Davoine, Thomas

Abstract

I take seriously the hypothesis that the wealthy lack time to consume to explain empirical evidence on old age asset decumulation and rich savings rates. Basic life-cycle theory predicts that households run down their assets toward the end of their life but evidence shows they do it at a very low rate. Under homothetic preferences, this theory also predicts that rich and poor save at the same rate, inconsistent with empirical evidence. Other existing models are also inconsistent with both evidence at the same time. Integrating a Becker home production model in Ramsey growth theory, I show that time constraints can explain the evidence on savings rate and asset decumulation, as well as some other evidence difficult to rationalize.

Suggested Citation

  • Davoine, Thomas, 2012. "Time constraints, saving and old age," Economics Working Paper Series 1221, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2012:21
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1221.pdf
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    More about this item

    Keywords

    Time constraints; home production; neoclassical growth theory; savings rate; old age asset decumulation;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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