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The savings gap in Hungary

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  • Gál, Róbert Iván
  • Törzsök, Árpád

Abstract

In a simple cohort model we carry out a projection based on current per capita age profiles of labour income and consumption and combine them with expected future age compositions. We use 2012 Hungarian data. Due to a shrinking and ageing population this exercise predicts a growing gap between labour income and consumption implying that the difference would be covered by asset-based revenues. We apply two balancing items: a windfall capital endowment in the base year, and gradual capital accumulation through higher savings. We also quantify how much the household economy, an integral but unregistered part of a modern economy, can absorb the effects of ageing. In addition, we test against a model using demographic data from 1995. The two decades between the mid-1990s and the mid-2010s offered a special demographic opportunity for Hungary and coincided with the botched pre-funding experiment in the public pension system. We demonstrate the potential of this missed opportunity.

Suggested Citation

  • Gál, Róbert Iván & Törzsök, Árpád, 2020. "The savings gap in Hungary," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    • Handle: RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x16300767
    DOI: 10.1016/j.jeoa.2017.05.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic consequences of demographic trends; National Transfer Accounts; Unpaid household labour; Pension reform;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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