IDEAS home Printed from https://ideas.repec.org/p/hai/wpaper/200514.html
   My bibliography  Save this paper

Why Nations Become Wealthy: The Effects of Adult Longevity on Saving

Author

Listed:
  • Andrew Mason

    (Department of Economics, University of Hawaii at Manoa)

  • Tomoko Kinugasa

    (Graduate School of Economics, Kobe University)

Abstract

Many countries experienced a rema rkable increase in life expectancy during the 20th century, but the development implications have received only modest attention. We analyze steady state and out-of-steady-state effects of the transition in adult longevity on the national saving rate using an overlapping generations model. We show that the national saving rate depends on both the level and rate of change in adult survival. Countries with rapid transitions have particularly elevated saving rates. Empirical evidence is drawn from two sources: long-term historical trends for a small number of countries and world panel data for 1960-95. Two important conclusions are supported by the empirical analysis. First, the demographic transition had a large positive effect on aggregate saving, but over three-quarters of the gain was due to improvements in old-age survival rather than declines in youth dependency. Second, population aging will not lead to a decline in aggregate saving rates. The compositional effect – lower saving rates among the elderly – is dominated by the behavioral effect – individuals will save more to provide for a longer old age.

Suggested Citation

  • Andrew Mason & Tomoko Kinugasa, 2005. "Why Nations Become Wealthy: The Effects of Adult Longevity on Saving," Working Papers 200514, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200514
    as

    Download full text from publisher

    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_05-14.pdf
    File Function: First version, 2005
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kelley, Allen C & Schmidt, Robert M, 1996. "Saving, Dependency and Development," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(4), pages 365-386, November.
    2. Kuehlwein, Michael, 1993. "Life-Cycle and Altruistic Theories of Saving with Lifetime Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 38-47, February.
    3. Zilcha, Itzhak & Friedman, Joseph, 1985. "Saving behavior in retirement when life horizon is uncertain," Economics Letters, Elsevier, vol. 17(1-2), pages 63-66.
    4. Paul R. Gregory & Manouchehr Mokhtari & Wolfram Schrettl, 1999. "Do The Russians Really Save That Much? - Alternate Estimates From The Russian Longitudinal Monitoring Survey," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 694-703, November.
    5. Robert M. Schmidt & Allen C. Kelley, 1996. "Saving, dependency and development," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(4), pages 365-386.
    6. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-577, June.
    7. Leung, Siu Fai, 1994. "Uncertain Lifetime, the Theory of the Consumer, and the Life Cycle Hypothesis," Econometrica, Econometric Society, vol. 62(5), pages 1233-1239, September.
    8. Ronald D Lee & Andrew Mason & Tim Miller, 1998. "Saving, Wealth, and Population," Working Papers 199805, University of Hawaii at Manoa, Department of Economics.
    9. David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life‐cycle Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 319-338, September.
    10. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    11. World Bank, 2003. "World Development Indicators 2003," World Bank Publications - Books, The World Bank Group, number 13920.
    12. Deaton, A. & Paxson, C., 1998. "Growth, Demographic Structure, and National Saving in Taiwan," Papers 183, Princeton, Woodrow Wilson School - Development Studies.
    13. Junji Kageyama, 2003. "The Effects of A Continuous Increase in Lifetime on Saving," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(2), pages 163-183, June.
    14. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    15. repec:fth:harver:1490 is not listed on IDEAS
    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. Andrew Mason & Sang-Hyop Lee, 2012. "Population, wealth, and economicgrowth in Asia and the Pacific," Chapters, in: Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), Aging, Economic Growth, and Old-Age Security in Asia, chapter 2, pages 32-82, Edward Elgar Publishing.
    2. Ronald Lee & Andrew Mason, 2010. "Fertility, Human Capital, and Economic Growth over the Demographic Transition [Fécondité, capital humain et croissance économique au cours de la transition démographique]," European Journal of Population, Springer;European Association for Population Studies, vol. 26(2), pages 159-182, May.
    3. Johan Fourie, 2012. "The wealth of the Cape Colony: Measurements from probate inventories," Working Papers 268, Economic Research Southern Africa.
    4. Aylit T. Romm & Martha Wolny, 2012. "The Impact of Later Retirement Ages on Aggregate Household Savings and Saving Rates: An Analysis of OECD Countries," Working Papers 269, Economic Research Southern Africa.
    5. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Risk," ANU Working Papers in Economics and Econometrics 2006-461, Australian National University, College of Business and Economics, School of Economics.
    6. Mason, Andrew & Kinugasa, Tomoko, 2008. "East Asian economic development: Two demographic dividends," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 389-399.
    7. P. C. Albuquerque, 2015. "Demographics and the Portuguese economic growth," Working Papers Department of Economics 2015/17, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    8. Jane Golley & Rod Tyers, 2006. "Demographic Change and the Labour Supply Constraint," ANU Working Papers in Economics and Econometrics 2006-467, Australian National University, College of Business and Economics, School of Economics.
    9. Maliszewska, Maryla & Ahmed, S. Amer & Cruz, Marcio & Winters, Alan, 2016. "Cashing in the demographic dividend," Conference papers 332794, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. David E. Bloom & Jocelyn Finlay & Salal Humair & Andrew Mason & Olanrewaju Olaniyan & Adedoyin Soyibo, 2016. "Prospects for Economic Growth in Nigeria: A Demographic Perspective," PGDA Working Papers 12715, Program on the Global Demography of Aging.
    11. Andrew Mason & Ronald Lee & Sang-Hyop Lee, 2010. "The Demographic Transition and Economic Growth in the Pacific Rim," NBER Chapters, in: The Economic Consequences of Demographic Change in East Asia, pages 19-55, National Bureau of Economic Research, Inc.

    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. Mason, Andrew & Kinugasa, Tomoko, 2008. "East Asian economic development: Two demographic dividends," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 389-399.
    2. Kinugasa, Tomoko & Mason, Andrew, 2007. "Why Countries Become Wealthy: The Effects of Adult Longevity on Saving," World Development, Elsevier, vol. 35(1), pages 1-23, January.
    3. Laishram Ladusingh & M.R. Narayana, 2012. "Demographic dividends for India: evidence and implications based on National Transfer Accounts," Chapters, in: Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), Aging, Economic Growth, and Old-Age Security in Asia, chapter 7, pages 203-230, Edward Elgar Publishing.
    4. Andrew Mason & Ronald Lee & Sang-Hyop Lee, 2010. "The Demographic Transition and Economic Growth in the Pacific Rim," NBER Chapters, in: The Economic Consequences of Demographic Change in East Asia, pages 19-55, National Bureau of Economic Research, Inc.
    5. David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life‐cycle Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 319-338, September.
    6. David E. Bloom & David Canning, 2004. "Global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 9-56.
    7. Elwin Tobing, 2012. "Demography and cross-country differences in savings rates: a new approach and evidence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 963-987, July.
    8. Lindh, Thomas & Malmberg, Bo, 2007. "Demographically based global income forecasts up to the year 2050," International Journal of Forecasting, Elsevier, vol. 23(4), pages 553-567.
    9. Eytan Sheshinski, 2005. "Longevity and Aggregate Savings," Discussion Paper Series dp403, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    10. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    11. Shesshinski, Eytan, 2006. "Longevity and Aggregate Savings," MPRA Paper 55165, University Library of Munich, Germany, revised Mar 2007.
    12. Miguel Sánchez-Romero, 2013. "The role of demography on per capita output growth and saving rates," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1347-1377, October.
    13. 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.
    14. Andy Mason & Sang-Hyop Lee & Ronald Lee, 2010. "Will Demographic Change Undermine Asia’s Growth Prospects?," Chapters, in: Masahiro Kawai & Jong-Wha Lee & Peter A. Petri & Giovanni Capanelli (ed.), Asian Regionalism in the World Economy, chapter 3, Edward Elgar Publishing.
    15. Axel Börsch‐Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    16. Jason S. Scott & John B. Shoven & Sita N. Slavov & John G. Watson, 2022. "Is automatic enrollment consistent with a life cycle model?," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 9-20, January.
    17. Huang, Huaxiong & Milevsky, Moshe A. & Salisbury, Thomas S., 2012. "Optimal retirement consumption with a stochastic force of mortality," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 282-291.
    18. Kogel, Tomas, 2005. "Youth dependency and total factor productivity," Journal of Development Economics, Elsevier, vol. 76(1), pages 147-173, February.
    19. Schunk Daniel, 2009. "What Determines Household Saving Behavior: An Examination of Saving Motives and Saving Decisions 06.01.2009," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(4), pages 467-491, August.
    20. Lindh, Thomas & Malmberg, Bo, 2002. "Swedish post-war economic development. The role of age structure in a welfare state," Arbetsrapport 2003:4, Institute for Futures Studies.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hai:wpaper:200514. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Web Technician (email available below). General contact details of provider: https://edirc.repec.org/data/deuhius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.