The Life-Cycle Hypothesis, Fiscal Policy, and Social Security
The paper reviews some of the most important results of the Life Cycle Hypothesis for understanding individual and aggregate saving behaviour. It then turns to the implications for fiscal policy and social security, highlighting Modigliani’s seminal contributions. Over time competing theories have emerged, and some empirical findings are difficult to reconcile with LCH; chiefly aspects of inertia, myopia, and irrational behaviour documented by the recent behavioural literature. But the LCH is still the benchmark model to think about individual saving decisions, the aggregate evidence and policy issues.
|Date of creation:||01 May 2005|
|Date of revision:|
|Publication status:||Published in Banca Nazionale del Lavoro Quarterly Review, June-September 2005, vol. 58, issue 233-243, pages 173-86|
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