New Zealand's old-age pension scheme and household saving
Purpose - The combination of low rates of private saving and projected increases in the fiscal burden of financing a public pension scheme for an ageing population poses a major policy challenge in New Zealand. Policy discourses espouse pension reform and the redoubling of household saving efforts. However, some of the policy options could have offsetting effects. To inform the debate with research findings, the purpose of this paper is to revisit the relationship between social security and household saving. Design/methodology/approach - The paper employs a constructed social security wealth (SSW) variable in a hybrid life cycle-permanent income consumption/saving model pioneered by Feldstein. Time series techniques are used. Findings - The results show that an increase in the constructed gross SSW variable boosts saving. This suggests that concerns with accumulating assets to match the length of the implicit life expectancy at the current pension eligibility age overwhelm the view that the pension benefit is an adequate substitute for household assets. The other findings are consistent with a priori expectations: increases in disposable income boost saving; there is a significant propensity to consume out of household net wealth; and inflation and unemployment engender significant precautionary saving. Practical implications - A policy to raise the retirement age may reduce the gross SSW and therefore the fiscal burden of the public pension scheme. However, in shortening the expected post-retirement period that households have to save for, the policy may also reduce the saving rate. Originality/value - Although the Feldstein approach has been used in studies in countries like Australia, Canada and the USA, a comparable study has not been undertaken in New Zealand. This study seeks to fill that void.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2011)
Issue (Month): 9 (August)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/ijse.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
- Bewley, R. A., 1979. "The direct estimation of the equilibrium response in a linear dynamic model," Economics Letters, Elsevier, vol. 3(4), pages 357-361.
- Deaton, Angus, 1991.
"Saving and Liquidity Constraints,"
Econometric Society, vol. 59(5), pages 1221-1248, September.
- Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
- Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
- Martin Feldstein, 1995. "Social Security and Saving: New Time Series Evidence," NBER Working Papers 5054, National Bureau of Economic Research, Inc.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Carmen M. Reinhart & Ioannis Tokatlidis, 2003. "Financial Liberalisation: The African Experience," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(Supplemen), pages 53-88, September.
- Reinhart, Carmen & Tokatlidis, Ioannis, 2000. "Financial Liberalization: The African Experience," MPRA Paper 13423, University Library of Munich, Germany.
- Reinhart, Carmen & Tokatlidis, Ioannis, 2005. "Before and After Financial Liberalization," MPRA Paper 6986, University Library of Munich, Germany.
- Phelim Boyle & John Murray, 1979. "Social Security Wealth and Private Saving in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 456-468, August.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-277, August.
- Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
- Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
- Alessandro Cigno & Luca Casolaro & Furio C. Rosati, 2002. "The Impact of Social Security on Saving and Fertility in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 189-189, May.
- Schwarz, Anita M. & Demirguc-Kunt, Asli, 1999. "Taking stock of pension reforms around the world," Social Protection and Labor Policy and Technical Notes 20533, The World Bank.
- Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, April.
- Brian McCulloch & Jane Frances, 2001. "Financing New Zealand Superannuation," Treasury Working Paper Series 01/20, New Zealand Treasury.
- Ellis Connolly & Marion Kohler, 2004. "The Impact of Superannuation on Household Saving," RBA Research Discussion Papers rdp2004-01, Reserve Bank of Australia.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, April.
- Michael J. Boskin & Lawrence J. Lau, 1988. "An Analysis of Postwar U.S. Consumption and Saving: Part I -- The Model and Aggregation," NBER Working Papers 2605, National Bureau of Economic Research, Inc.
- Grant Scobie & John Gibson & Trinh Le, 2004. "Saving for Retirement: New Evidence for New Zealand," Treasury Working Paper Series 04/12, New Zealand Treasury.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
- Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
- Mariangela Bonasia & Oreste Napolitano, 2006. "The Impact of Privatisation of Pension System on National Saving: The Case of Australia and Iceland," Discussion Papers 3_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Pesaran, M Hashem & Smith, Ron P, 1998. " Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
- Taylor, Mark P, 1999. "Real Interest Rates and Macroeconomic Activity," Oxford Review of Economic Policy, Oxford University Press, vol. 15(2), pages 95-113, Summer.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
- Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164, April.
- Johansen, Soren, 1995. "Identifying restrictions of linear equations with applications to simultaneous equations and cointegration," Journal of Econometrics, Elsevier, vol. 69(1), pages 111-132, September.
- Iris Claus & Grant Scobie, 2002. "Saving in New Zealand: Measurement and Trends," Treasury Working Paper Series 02/02, New Zealand Treasury. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eme:ijsepp:v:38:y:2011:i:9:p:767-788. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.