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Saving in an ageing society with public pensions: implications from lifecycle analysis

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  • Heikki Oksanen

Abstract

This paper studies saving in an economy where decline in fertility to a permanently lower level and increasing longevity are changing the age structure permanently and where the public pension system helps to smooth consumption over a lifetime of working and retirement. A simple overlapping generations (OLG) model is used for simulations, with the emphasis on the transition path. It is shown that, under plausible assumptions, the effect of population ageing on the capital to income ratio is positive and also that the saving rate increases in the first two to three decades. This first positive effect on the saving rate is highlighted and contrasted with results in previous literature. It is also shown that moving from a pure PAYG pension system to partial funding of mandatory pensions affects saving positively and has implications for intergenerational equity.

Suggested Citation

  • Heikki Oksanen, 2009. "Saving in an ageing society with public pensions: implications from lifecycle analysis," European Economy - Economic Papers 2008 - 2015 370, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0370
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    File URL: http://ec.europa.eu/economy_finance/publications/pages/publication14320_en.pdf
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Saving in an ageing society with public pensions: implications from lifestyle analysis; population ageing; public pensions; private and public saving; Oksanen;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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