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U.S. Demographics and Saving: Predictions of Three Saving Models

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  • Alan J. Auerbach
  • Jinyong Cai
  • Laurence J. Kotlikoff

Abstract

This paper compares the predictions of three different saving models with respect to the impact of projected U.S. demographic change on future U.S. saving rates. The three models are the life cycle model, the infinite horizon altruism model, and a reduced form econometric model. The findings for the different models indicate a great range of possible paths of future U.S. saving. However, the three models concur in predicting a peak in the U.S. national saving rate in the near future (within 15 years), followed by a significant decline in the saving rate thereafter. In fact, the findings suggest the strong possibility of negative U.S. saving rates beginning after 2030.

Suggested Citation

  • Alan J. Auerbach & Jinyong Cai & Laurence J. Kotlikoff, 1990. "U.S. Demographics and Saving: Predictions of Three Saving Models," NBER Working Papers 3404, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3404
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    References listed on IDEAS

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    1. David A. Wise, 1989. "The Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise89-1, January.
    2. Laurence J. Kotlikoff & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "From Deficit Delusion to the Fiscal Balance Rule: Looking for an Economically Meaningful Way to Assess Fiscal Policy," NBER Chapters, in: Generational Accounting around the World, pages 9-30, National Bureau of Economic Research, Inc.
    3. Alan J. Auerbach & Laurence J. Kotlikoff & Robert Hagemann & Giuseppe Nicoletti, 1989. "The Dynamics of an Aging Population: The Case of Four OECD Countries," NBER Working Papers 2797, National Bureau of Economic Research, Inc.
    4. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
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    Cited by:

    1. James Banks & Richard Blundell, 1994. "Household Saving Behavior in the United Kingdom," NBER Chapters, in: International Comparisons of Household Saving, pages 169-206, National Bureau of Economic Research, Inc.
    2. Bettendorf, Leon J.H. & Heijdra, Ben J., 2006. "Population ageing and pension reform in a small open economy with non-traded goods," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2389-2424, December.
    3. Naoto Yamauchi, 1996. "The Effects of Aging on National Saving and Asset Accumulation in Japan," NBER Chapters, in: The Economic Effects of Aging in the United States and Japan, pages 131-151, National Bureau of Economic Research, Inc.
    4. Shiyu Li & Laurence J. Kotlikoff & Shuanglin Lin & Wing Thye Woo & Yunyun Jiang, 2016. "How Much Will China Save? Projecting China's National Savings Through 2040," Asian Economic Journal, East Asian Economic Association, vol. 30(3), pages 255-274, September.
    5. Heijdra, Ben J. & Ligthart, Jenny E., 2006. "The Macroeconomic Dynamics Of Demographic Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 10(3), pages 349-370, June.
    6. Li, Shiyu & Lin, Shuanglin, 2023. "Housing property tax, economic growth, and intergenerational welfare: The case of China," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 233-251.
    7. Dániel Baksa & Zsuzsa Munkácsi, 2019. "More Gray, More Volatile? Aging and (Optimal) Monetary Policy," Bank of Lithuania Working Paper Series 67, Bank of Lithuania.

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