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The moderating role of financial development in the nexus between population aging and saving

Author

Listed:
  • Dong-Hyeon Kim

    (Korea University)

  • Peiyao Liu

    (Sungkyunkwan University)

  • Shu-Chin Lin

    (Sungkyunkwan University)

Abstract

The paper empirically investigates the saving consequence of population aging, an issue that is important for policymaking and still far from uncontroversial. Rather than providing another piece of evidence to verify the positive or negative correlation between population aging and saving, the contribution of the paper is to consider the moderating role of financial development in the nexus. In a cross-country panel data setting, we find that population aging proxied by old-age dependency decreases saving, but the effect diminishes with financial development. The opposite is found for life expectancy. Financial development weakens the saving-increasing effect of life expectancy. The findings hold for different types of saving and controlling for per-capita income growth. The data suggest that life expectancy may offset the effect of old-age dependency, limiting the influence of population aging on saving. The evidence also suggests that financial development constrains the saving effect of population aging and the need to consider a country’s extent of financial development to address the saving consequence as a population ages.

Suggested Citation

  • Dong-Hyeon Kim & Peiyao Liu & Shu-Chin Lin, 2024. "The moderating role of financial development in the nexus between population aging and saving," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-32, April.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:2:d:10.1007_s10644-024-09670-5
    DOI: 10.1007/s10644-024-09670-5
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    More about this item

    Keywords

    Population aging; National saving; Private saving; Government saving; Financial development;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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