IDEAS home Printed from https://ideas.repec.org/a/psl/bnlaqr/2005210.html
   My bibliography  Save this article

The life-cycle hypothesis, fiscal policy and social security

Author

Listed:
  • Tullio Jappelli

    () (Università degli Studi di Salerno, Dipartimento di Scienze Economiche e Statistiche, Fisciano, Salerno (Italy))

Abstract

The paper reviews some of the most important results of the Life Cycle Hypothesis (LCH) for understanding individual and aggregate saving behaviour. It then turns to the implications for fiscal policy and social security, highlighting Modigliani’s seminal contributions. Over time competing theories have emerged, and some empirical findings are difficult to reconcile with LCH; chiefly aspects of inertia, myopia, and irrational behaviour documented by the recent behavioural literature. But the LCH is still the benchmark model to think about individual saving decisions, the aggregate evidence and policy issues.

Suggested Citation

  • Tullio Jappelli, 2005. "The life-cycle hypothesis, fiscal policy and social security," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 173-186.
  • Handle: RePEc:psl:bnlaqr:2005:210
    as

    Download full text from publisher

    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9853/9735
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
    2. Tullio Jappelli & Franco Modigliani, 2006. "The Age–Saving Profile and the Life-Cycle Hypothesis," Chapters, in: Lawrence R. Klein (ed.), Long-run Growth and Short-run Stabilization, chapter 2, Edward Elgar Publishing.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Modigliani, Franco & Sterling, Arlie, 1986. "Government Debt, Government Spending and Private Sector Behavior: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1168-1179, December.
    5. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    6. 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.
    7. Feldstein, Martin S, 1976. "Social Security and Saving: The Extended Life Cycle Theory," American Economic Review, American Economic Association, vol. 66(2), pages 77-86, May.
    8. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-732, August.
    9. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
    10. Rossi, Nicola & Visco, Ignazio, 1995. "National saving and social security in Italy," Ricerche Economiche, Elsevier, vol. 49(4), pages 329-356, December.
    11. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    12. Modigliani, Franco. & Sterling, Arlie., 1981. "Determinants of private saving with special reference to the role of social security : cross country tests," Working papers 1209-81., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    2. Qazi-Muhammad Adnan Hye & Wee-Yeap Lau, 2018. "Does Financial and Trade Liberalization Drive Private Savings in Pakistan?," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(4), pages 198-212, December.
    3. Luca Pieroni & David Aristei, 2006. "Regional Differences in Growth Rates: A Microdata Approach," ERSA conference papers ersa06p799, European Regional Science Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tullio Jappelli, 2005. "L’ipotesi del ciclo vitale, la politica fiscale e la previdenza sociale," Moneta e Credito, Economia civile, vol. 58(230-231), pages 187-202.
    2. John Laitner, 2002. "Transition Paths and Social Security Reform," Working Papers wp025, University of Michigan, Michigan Retirement Research Center.
    3. Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011. "Costly financial intermediation in neoclassical growth theory," Quantitative Economics, Econometric Society, vol. 2(1), pages 1-36, March.
    4. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    5. Hubbard, R. Glenn & Skinner, Jonathan & Zeldes, Stephen P., 1994. "The importance of precautionary motives in explaining individual and aggregate saving," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 59-125, June.
    6. Arrondel, Luc & Masson, Andre, 2006. "Altruism, exchange or indirect reciprocity: what do the data on family transfers show?," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 14, pages 971-1053, Elsevier.
    7. Tullio Jappelli & Luigi Pistaferri, 2000. "The dynamics of household wealth accumulation in Italy," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 269-295, June.
    8. George Constantinides & John Donaldson & Rajnish Mehra, 2007. "Junior is rich: bequests as consumption," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 125-155, July.
    9. Prema-Chandra Athukorala & Pang-Long Tsai, 2003. "Determinants of Household Saving in Taiwan: Growth, Demography and Public Policy," Journal of Development Studies, Taylor & Francis Journals, vol. 39(5), pages 65-88.
    10. Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2007. "Intermediated quantities and returns," Working Papers 655, Federal Reserve Bank of Minneapolis.
    11. Laitner, John & Juster, F Thomas, 1996. "New Evidence on Altruism: A Study of TIAA-CREF Retirees," American Economic Review, American Economic Association, vol. 86(4), pages 893-908, September.
    12. Douglas W. Elmendorf, "undated". "The Effect of Interest-Rate Changes on Household Saving and Consumption: A Survey," Finance and Economics Discussion Series 1996-27, Board of Governors of the Federal Reserve System (U.S.), revised 10 Dec 2019.
    13. John Laitner, 2001. "Modeling the Macroeconomic Implications of Social Security Reform," Working Papers wp015, University of Michigan, Michigan Retirement Research Center.
    14. John Laitner, 2001. "Wealth Accumulation in the U.S.: Do Inheritances and Bequests Play a Significant Role?," Working Papers wp019, University of Michigan, Michigan Retirement Research Center.
    15. Günther Fink & Silvia Redaelli, 2005. "Understanding Bequest Motives An Empirical Analysis of Intergenerational Transfers," DNB Working Papers 042, Netherlands Central Bank, Research Department.
    16. Adrian Adermon & Mikael Lindahl & Daniel Waldenström, 2018. "Intergenerational Wealth Mobility and the Role of Inheritance: Evidence from Multiple Generations," Economic Journal, Royal Economic Society, vol. 128(612), pages 482-513, July.
    17. Barsky, Robert B & Mankiw, N Gregory & Zeldes, Stephen P, 1986. "Ricardian Consumers with Keynesian Propensities," American Economic Review, American Economic Association, vol. 76(4), pages 676-691, September.
    18. Árvai, Zsófia & Tóth, István János, 2001. "Likviditási korlát és fogyasztói türelmetlenség. A magyar háztartások fogyasztási és megtakarítási döntéseinek empirikus vizsgálata [The liquidity constraint and consumer impatience. An empirical e," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1009-1038.
    19. Christopher House & John Laitner & Dmitriy Stolyarov, 2008. "Valuing Lost Home Production Of Dual Earner Couples," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 701-736, May.
    20. C. Y. Horioka & H. Fujisaki & W. Watanabe & T. Kouno, 2000. "Are Americans More Altruistic than the Japanese? A U.S.-Japan Comparison of Saving and Bequest Motives," International Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 1-31.

    More about this item

    Keywords

    Consumption; Fiscal Policy; Life Cycle; Policy; Saving; Social Security; Wealth;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:psl:bnlaqr:2005:210. 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: (Carlo D'Ippoliti). General contact details of provider: http://www.economiacivile.it .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.