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Age and Cohort Effects in Saving and the German Retirement System

  • Börsch-Supan, Axel
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    As the public pay-as-you-go pension systems of the aging industrialized countries are likely to become seriously strained under the growing dependency burden, the question arises whether a society should rely on private savings to finance old-age consumption. This is an empirical question about the magnitude and the flexibility of saving rates. This paper argues that saving rates must increase in an unprecedented fashion in order to compensate for the dependency effect. The paper takes the German case as an example. It analyses saving behavior in Germany using three waves of the Income and Expenditure Survey. It separates age and cohort effects; computes the demographically induced change in the aggregate saving rate; and compares the magnitude of these excess savings with the increasing burden of the pension system. Finally, a macroeconomic simulation model is used to explore possible paths of the cohort effects in saving rates.

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    File URL: http://ub-madoc.bib.uni-mannheim.de/1061/1/513.pdf
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    Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 513.

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    Date of creation: 1995
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    Handle: RePEc:mnh:vpaper:1061
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    Web page: http://www.vwl.uni-mannheim.de/institut/
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    1. Borsch-Supan, Axel H & Stahl, Konrad, 1991. "Life Cycle Savings and Consumption Constraints: Theory, Empirical Evidence, and Fiscal Implications," Journal of Population Economics, Springer, vol. 4(3), pages 233-55, August.
    2. Johnson, D. Gale, 1999. "Population and economic development," China Economic Review, Elsevier, vol. 10(1), pages 1-16.
    3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
    4. Bo[dieresis]s, Dieter & von Weizsa[dieresis]cker, Robert K., 1989. "Economic consequences of an aging population," European Economic Review, Elsevier, vol. 33(2-3), pages 345-354, March.
    5. Gary S. Becker & Robert J. Barro, . "A Reformulation of the Economic Theory of Fertility," University of Chicago - Population Research Center 85-11, Chicago - Population Research Center.
    6. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
    7. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
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