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Do ageing economies save less? Evidence from OECD data

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  • Benjamin Wong
  • Kam Ki Tang

Abstract

Purpose - The purpose of this paper is to re‐examine the effect of population ageing on private saving, taking into account the fact that ageing is brought about by not only rising old‐aged dependency but also expanding longevity. Design/methodology/approach - The study uses panel data of 22 OECD countries from 1961 to 2010. Linear and non‐linear panel regression methods are used. The study takes into account the time series characteristic of the data, such as the deterministic trend present in old‐age dependency ratio. Findings - Longevity consistently has a significant positive impact on savings, while old‐aged dependency rate has no discernible impact once country‐specific time trends in the data are accounted for. The general finding within the literature where old‐age dependency exerts a negative impact on savings is sensitive to the manner in which the data is handled and/or the sample selected. Originality/value - First, the authors jointly consider rising old‐aged dependency and expanding longevity on savings, thus avoiding potential omitted variable bias in previous studies. Second, they explore non‐linearity in the savings‐ageing relationship which was ignored previously. Third, they identify whether saving rate and demographic measures are sharing common stochastic trends or driven by individual deterministic trends to avoid spurious regression results.

Suggested Citation

  • Benjamin Wong & Kam Ki Tang, 2013. "Do ageing economies save less? Evidence from OECD data," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 40(6), pages 591-605, May.
    • Handle: RePEc:eme:ijsepp:v:40:y:2013:i:6:p:591-605
    DOI: 10.1108/03068291311321875
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    References listed on IDEAS

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    1. Ram, Rati, 1982. "Dependency Rates and Aggregate Savings: A New International Cross-Section Study," American Economic Review, American Economic Association, vol. 72(3), pages 537-544, June.
    2. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
    3. Florian Pelgrin & Alain de Serres, 2003. "The Decline in Private Saving Rates in the 1990s in OECD Countries: How Much Can Be Explained by Non-wealth Determinants?," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 117-153.
    4. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-896, December.
    5. Gupta, Kanhaya L, 1971. "Dependency Rates and Savings Rates: Comment," American Economic Review, American Economic Association, vol. 61(3), pages 469-471, June.
    6. Goldberger, Arthur S, 1973. "Dependency Rates and Savings Rates: Further Comment," American Economic Review, American Economic Association, vol. 63(1), pages 232-233, March.
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    1. Loumrhari, Ghizlan, 2013. "Vieillissement démographique, longévité et épargne. Le cas du Maroc [Ageing population, longevity and save. The case of Morocco]," MPRA Paper 50649, University Library of Munich, Germany.
    2. Zheng Guo & Linchen Liu & Xuan Liu, 2016. "Population Aging, Marginal Propensity to Consume, and Economic Growth," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(9), pages 534-546, September.
    3. van Tongeren, Jan W. & Bruil, Arjan, 2022. "Projections to 2025 of the household sector within the Dutch economy," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    4. Misbah Tanveer Choudhry & Enrico Marelli & Marcello Signorelli, 2016. "Age dependency and labour productivity divergence," Applied Economics, Taylor & Francis Journals, vol. 48(50), pages 4823-4845, October.
    5. Ghizlan Loumrhari, 2014. "Ageing, Longevity and Savings: The Case of Morocco," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 344-352.
    6. Olfa Frini, 2021. "The relationship ageing of the population and saving in an unemployment context: Empirical evidence using an autoregressive distributed lag bounds testing approach," Australian Economic Papers, Wiley Blackwell, vol. 60(1), pages 98-121, March.
    7. Koji Yasuda, 2022. "Microdata analysis about the effects of health status and bequest motive on the elderly household assets in Japan," International Journal of Economic Policy Studies, Springer, vol. 16(1), pages 27-41, February.
    8. Pascual-Saez, Marta & Cantarero-Prieto, David & Pires Manso, José R., 2020. "Does population ageing affect savings in Europe?," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 291-306.

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