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Health, Pension Benefits and Longevity How They Affect Household Savings?

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  • Najat El Mekkaoui-de Freitas

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Joaquim Oliveira Martins

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyses the impact of health, pension systems and longevity on savings. It uses a simple life-cycle model embodying social transfers (health care and pension expenditures) and changes in longevity to determine the level of household savings. From this model, we derived an econometric specification, augmented with the effects of public budget balances. The model is estimated for a panel of 22 OECD countries for the period 1970-2009. Our principal result is that, from the point of view of incentive to save, health transfers have a similar impact as pension replacement rates. Therefore, welfare reforms that reduce replacement rates without reforming health system may not have all the expected impact on household savings. In line with life-cycle theory, we found that longevity increases saving ratios.

Suggested Citation

  • Najat El Mekkaoui-de Freitas & Joaquim Oliveira Martins, 2014. "Health, Pension Benefits and Longevity How They Affect Household Savings?," Post-Print hal-01519827, HAL.
    • Handle: RePEc:hal:journl:hal-01519827
    DOI: 10.1016/j.jeoa.2014.03.001
    Note: View the original document on HAL open archive server: https://hal.science/hal-01519827
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