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The effects of age and cohort on household saving

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  • Mäki-Fränti, Petri

Abstract

According to the standard life cycle model, household saving rate should peak at the best working age and turn then to decline so that households dissolve their savings after retirement. This study examines, how age and birth cohort affect the saving behavior of the Finnish households. A synthetic panel data is used to estimate an empirical age-cohort-period model of income, consumption and saving rate of the households. The results suggest that the Fnnish households continue saving even in the old age and younger cohohorts tend to save more than the older ones. Thus, a projected aggregate saving rate of the Finnish economy will slightly increase during the next two decades.

Suggested Citation

  • Mäki-Fränti, Petri, 2022. "The effects of age and cohort on household saving," BoF Economics Review 6/2022, Bank of Finland.
    • Handle: RePEc:zbw:bofecr:62022
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    References listed on IDEAS

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    1. Finlay Richard & Price Fiona, 2015. "Household saving in Australia," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 677-704, July.
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    7. Päivi Kankaanranta, 2019. "A Cohort-Analysis of Age-Wealth Profile in Finland," Discussion Papers 130, Aboa Centre for Economics.
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    More about this item

    Keywords

    population aging; household saving; age-cohor-period models; synthetic cohort;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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