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Growth, demographic structure, and national saving in Taiwan

Author

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  • Angus Deaton

    (Princeton University)

  • Christina Paxson

    (Princeton University)

Abstract

This paper is concerned with the effects that changes in demographic structure have had on Taiwan's national saving rate, and how coming changes in its age structure -- notably population aging -- will affect the future saving rate. We examine this topic within the framework of the life-cycle hypothesis (LCH). Life-cycle theory is a natural starting place, since it implies that changes in demographic structure can exert potentially large effects on national saving: increases in the number of people who save (presumably those in middle age) relative to those who save little or dissave (the very young and the elderly) will increase the aggregate saving rate. A related implication of the LCH is that changes in the rate of growth of per capita income affect saving: higher rates of economic growth increase the life-time wealth of the young relative to the old, and the effects on saving of higher growth are much the same as the effects of increasing the numbers of young relative to the old. The LCH also delivers a rich set of predictions about interactions between economic growth and the age structure. As is emphasized in the variable rate-of-growth models of Fry and Mason (1982) and Mason (1987, 1988), the effects of changes in age structure on the saving rate will depend on the life-time wealth of individuals in different age groups, something determined by economic growth. These interactions are important for understanding how the Taiwanese saving rate has evolved over time, and how it may change in the future.

Suggested Citation

  • Angus Deaton & Christina Paxson, 1999. "Growth, demographic structure, and national saving in Taiwan," Working Papers 224, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  • Handle: RePEc:pri:rpdevs:deaton_paxson_growth_demographic_structure_and_national_saving_in_taiwan_pdr.pdf
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    Cited by:

    1. 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.
    2. 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.
    3. Lee, Ronald & Mason, Andrew & Miller, Timothy, 2000. "From Transfers to Individual Responsibility: Implications for Savings and Capital Accumulation in Taiwan and the United States," Arbetsrapport 2000:3, Institute for Futures Studies.
    4. David E. Bloom & David Canning & Michael Moore, 2004. "The Effect of Improvements in Health and Longevity on Optimal Retirement and Saving," NBER Working Papers 10919, National Bureau of Economic Research, Inc.
    5. M. Baldini & C. Mazzaferro, 2000. "Transizione demografica e formazione del risparmio delle famiglie italiane," Working Papers 366, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research.
    7. Floro, Maria & Seguino, Stephanie, 2002. "Gender effects on aggregate saving: A Theoretical and Empirical Analysis," MPRA Paper 6541, University Library of Munich, Germany, revised Dec 2000.
    8. Marenglen Marku & Djavad Salehi-Isfahani, 2006. "Reversal of fortunes: a cohort analysis of lifetime earnings in Iran," Working Papers e06-1, Virginia Polytechnic Institute and State University, Department of Economics.

    More about this item

    Keywords

    Taiwan;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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