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Note on Longevity and Aggregate Savings

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  • Eytan Sheshinski

Abstract

In a recent paper in this journal, Bloom, Canning and Graham (2003) model the effect of changes in longevity on individual savings. They proceed to present empirical findings about the relation between longevity and aggregate savings. There is a missing link between their empirics and theory: the changes in the populations age density distribution due to increased longevity. This note provides such an aggregation analysis within a simple model with uncertain survival, endogenous life‐cycle consumption and retirement age. It is shown that, with continuous annuitization, an increase in expected longevity raises aggregate steady‐state savings. The magnitude of this effect depends on the economy's age‐specific distribution and on the elasticity of optimum retirement to changes in longevity.

Suggested Citation

  • Eytan Sheshinski, 2006. "Note on Longevity and Aggregate Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 353-356, July.
    • Handle: RePEc:bla:scandj:v:108:y:2006:i:2:p:353-356
    DOI: 10.1111/j.1467-9442.2006.00451.x
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    1. Eytan Sheshinski, 2005. "Longevity and Aggregate Savings," Discussion Paper Series dp403, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
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    Cited by:

    1. Dieppe, Alistair & Mourinho Félix, Ricardo & Marchiori, Luca & Grech, Owen & Albani, Maria & Lalouette, Laure & Kulikov, Dmitry & Papadopoulou, Niki & Sideris, Dimitris & Irac, Delphine & Gordo Mora, , 2015. "Public debt, population ageing and medium-term growth," Occasional Paper Series 165, European Central Bank.
    2. Eytan Sheshinski, 2005. "Longevity and Aggregate Savings," Discussion Paper Series dp403, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    3. Shesshinski, Eytan, 2006. "Longevity and Aggregate Savings," MPRA Paper 55165, University Library of Munich, Germany, revised Mar 2007.
    4. Linden, Mikael, 2022. "Retirement duration maximization with survival time expectations," MPRA Paper 115903, University Library of Munich, Germany.
    5. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    6. Anne C. Gielen, 2009. "Working hours flexibility and older workers' labor supply," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 240-274, April.
    7. Lei He & Shuyi Zhou & Zilan Liu, 2020. "How is aggregate household consumption affected jointly by longevity, pension, and aging? Theory and evidence," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(4), pages 499-512, December.
    8. repec:ecb:ecbops:2014165 is not listed on IDEAS
    9. Torben Andersen, 2014. "Intergenerational redistribution and risk sharing with changing longevity," Journal of Economics, Springer, vol. 111(1), pages 1-27, February.
    10. Spånberg, Erik & Shahnazarian, Hovick, 2019. "The importance of the financial system for the current account in Sweden: A sectoral approach," International Economics, Elsevier, vol. 158(C), pages 91-103.
    11. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics wp52, Department of Economics, Central bank of Iceland.
    12. Klaus Prettner & David Canning, 2014. "Increasing life expectancy and optimal retirement in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 191-217, May.
    13. Lei He & Shuyi Zhou & Zilan Liu, 0. "How is aggregate household consumption affected jointly by longevity, pension, and aging? Theory and evidence," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 0, pages 1-14.
    14. Johan Fourie, 2012. "The wealth of the Cape Colony: Measurements from probate inventories," Working Papers 268, Economic Research Southern Africa.
    15. Aylit T. Romm & Martha Wolny, 2012. "The Impact of Later Retirement Ages on Aggregate Household Savings and Saving Rates: An Analysis of OECD Countries," Working Papers 269, Economic Research Southern Africa.
    16. Owen O'Donnell & Federica Teppa & Eddy van Doorslaer, 2008. "Can subjective survival expectations explain retirement behaviour?," DNB Working Papers 188, Netherlands Central Bank, Research Department.
    17. Andersen, Torben M., 2012. "Fiscal sustainability and demographics – Should we save or work more?," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 264-280.
    18. Lei He & Zhengqi Wang, 2023. "The interaction effects of rising life expectancy and the public pension burden on aggregate savings and economic growth," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(2), pages 229-250, May.

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