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Time constraints, saving and old age

  • Davoine, Thomas

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    Abstract I take seriously the hypothesis that the wealthy lack time to consume to explain empirical evidence on old age asset decumulation and rich savings rates. Basic life-cycle theory predicts that households run down their assets toward the end of their life but evidence shows they do it at a very low rate. Under homothetic preferences, this theory also predicts that rich and poor save at the same rate, inconsistent with empirical evidence. Other existing models are also inconsistent with both evidence at the same time. Integrating a Becker home production model in Ramsey growth theory, I show that time constraints can explain the evidence on savings rate and asset decumulation, as well as some other evidence difficult to rationalize.

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    File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1221.pdf
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    Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1221.

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    Length: 23 pages
    Date of creation: Aug 2012
    Date of revision:
    Handle: RePEc:usg:econwp:2012:21
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