IDEAS home Printed from https://ideas.repec.org/a/eee/joecag/v3y2014icp21-28.html
   My bibliography  Save this article

Health, pension benefits and longevity: How they affect household savings?

Author

Listed:
  • El Mekkaoui de Freitas, Najat
  • Oliveira Martins, Joaquim

Abstract

This paper analyses the impact of health, pension systems and longevity on savings. It uses a simple life-cycle model embodying social transfers (health care and pension expenditures) and changes in longevity to determine the level of household savings. From this model, we derived an econometric specification, augmented with the effects of public budget balances. The model is estimated for a panel of 22 OECD countries for the period 1970–2009. From the point of view of incentive to save, we find that health transfers have a similar impact as pension replacement rates. Welfare reforms that reduce replacement rates without reforming health system may not have all the expected impact on household savings. In line with life-cycle theory, we found that longevity increases saving ratios.

Suggested Citation

  • El Mekkaoui de Freitas, Najat & Oliveira Martins, Joaquim, 2014. "Health, pension benefits and longevity: How they affect household savings?," The Journal of the Economics of Ageing, Elsevier, vol. 3(C), pages 21-28.
    • Handle: RePEc:eee:joecag:v:3:y:2014:i:c:p:21-28
    DOI: 10.1016/j.jeoa.2014.03.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2212828X14000048
    Download Restriction: no
    File URL: https://libkey.io/10.1016/j.jeoa.2014.03.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    2. Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, August.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. David M. Blau, 2008. "Retirement and Consumption in a Life Cycle Model," Journal of Labor Economics, University of Chicago Press, vol. 26(1), pages 35-71.
    5. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
    6. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.
    7. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," NBER Working Papers 9586, National Bureau of Economic Research, Inc.
    8. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-399, April.
    9. Henning Bohn, 2001. "Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 203-246, National Bureau of Economic Research, Inc.
    10. David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life‐cycle Savings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 319-338, September.
    11. Borsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 2001. "The German Savings Puzzle," Research in Economics, Elsevier, vol. 55(1), pages 15-38, March.
    12. Lopez Murphy, Pablo & Musalem, Alberto R., 2004. "Pension funds and national saving," Policy Research Working Paper Series 3410, The World Bank.
    13. Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, February.
    14. Bosworth, Barry & Burtless, Gary, 2004. "Pension Reform and Saving," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(3), pages 703-727, September.
    15. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    16. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    17. Florian Pelgrin & Alain de Serres, 2003. "The Decline in Private Saving Rates in the 1990s in OECD Countries: How Much Can Be Explained by Non-wealth Determinants?," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 117-153.
    18. Bloom, David E. & Canning, David & Mansfield, Richard K. & Moore, Michael, 2007. "Demographic change, social security systems, and savings," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 92-114, January.
    19. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    20. Mark Aguiar & Erik Hurst, 2013. "Deconstructing Life Cycle Expenditure," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 437-492.
    21. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    22. Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 692-711, December.
    23. Abel, Andrew B, 1986. "Capital Accumulation and Uncertain Lifetimes with Adverse Selection," Econometrica, Econometric Society, vol. 54(5), pages 1079-1097, September.
    24. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," NBER Working Papers 9586, National Bureau of Economic Research, Inc.
    25. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
    26. Rosa Aisa & Fernando Pueyo, 2013. "Population aging, health care, and growth: a comment on the effects of capital accumulation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1285-1301, October.
    27. Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
    28. Mr. Tim Callen & Mr. Christian Thimann, 1997. "Empirical Determinants of Household Saving: Evidence From OECD Countries," IMF Working Papers 1997/181, International Monetary Fund.
    29. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    30. Bergh, Jeroen C.J.M. van den & Ferrer-i-Carbonell, Ada, 1999. "Economic theories of sustainable consumption," Serie Research Memoranda 0055, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    31. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    32. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    33. Loayza, Norman & Schmidt-Hebbel, Klaus & Serven, Luis, 2000. "What drives private saving around the world?," Policy Research Working Paper Series 2309, The World Bank.
    34. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    35. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
    36. Luiz de Mello & Per Mathis Kongsrud & Robert Price, 2004. "Saving Behaviour and the Effectiveness of Fiscal Policy," OECD Economics Department Working Papers 397, OECD Publishing.
    37. Ramachandran K, 1999. "Zero Consumer Dissatisfaction," IIMA Working Papers WP1999-05-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    38. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Najat El Mekkaoui & Bérangère Legendre, 2022. "Does pension information impact savings?," Post-Print hal-03877170, HAL.
    2. Yansong David Wang & Tao Louie Xu & Cheng Yuan, 2024. "It Takes Three to Ceilidh: Pension System and Multidimensional Poverty Mitigation in China," Papers 2411.02807, arXiv.org.
    3. Renáta Pitoňáková, 2018. "Private Sector Savings," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-17, March.
    4. Mihai PĂUNICĂ & Alexandru MANOLE & Cătălina MOTOFEI & Gabriela - Lidia TĂNASE, 2020. "Life Expectancy from the Perspective of Global and Individual Wealth and Expenditures: A Granger Causality Study of Some Eu Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 170-184, December.
    5. Klaas Staal, 2023. "Household Savings and Negative Interest Rates," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(1), pages 1-13, May.
    6. Madeira, Carlos, 2021. "The long term impact of Chilean policy reforms on savings and pensions," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    7. Robert-Paul Berben & Ide Kearney & Robert Vermeulen, 2018. "DELFI 2.0, DNB's Macroeconomic Policy Model of the Netherlands," DNB Occasional Studies 1605, Netherlands Central Bank, Research Department.
    8. repec:idb:brikps:7677 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:dau:papers:123456789/12130 is not listed on IDEAS
    2. repec:dau:papers:123456789/9826 is not listed on IDEAS
    3. repec:dau:papers:123456789/2343 is not listed on IDEAS
    4. Alessandro Bucciol, 2007. "Life-Cycle Models, Economic Puzzles and Temptation Preferences," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 66(1), pages 115-144, March.
    5. Grigoli, Francesco & Herman, Alexander & Schmidt-Hebbel, Klaus, 2018. "Saving in the world," World Development, Elsevier, vol. 104(C), pages 257-270.
    6. Essig, Lothar, 2005. "Precautionary saving and old-age provisions : do subjective saving motives measures work?," Papers 05-22, Sonderforschungsbreich 504.
    7. D'Orlando, Fabio & Sanfilippo, Eleonora, 2010. "Behavioral foundations for the Keynesian consumption function," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 1035-1046, December.
    8. Caliendo, Frank & Aadland, David, 2007. "Short-term planning and the life-cycle consumption puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1392-1415, April.
    9. Andrea Repetto, 2001. "Incentivos al ahorro personal: Lecciones de la economía del comportamiento," Central Banking, Analysis, and Economic Policies Book Series, in: Felipe Morandé & Rodrigo Vergara & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edit (ed.),Análisis Empírico del Ahorro en Chile, edition 1, volume 1, chapter 7, pages 191-240, Central Bank of Chile.
    10. Miriam Beblo & Sven Schreiber, 2022. "Leisure and housing consumption after retirement: new evidence on the life-cycle hypothesis," Review of Economics of the Household, Springer, vol. 20(1), pages 305-330, March.
    11. Domeij David & Johannesson Magnus, 2006. "Consumption and Health," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-30, May.
    12. Kevin X. D. Huang & Frank Caliendo, 2011. "Rationalizing Multiple Consumption-Saving Puzzles in a Unified Framework," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 6(3), pages 359-388, September.
    13. Daria Pignalosa, 2021. "The Euler Equation Approach: Critical Implications of Recent Developments in the Theory of Intertemporal Choice," Bulletin of Political Economy, Bulletin of Political Economy, vol. 15(1), pages 1-43, June.
    14. Kevin X.D. Huang & Frank Caliendo, 2007. "Rationalizing Seven Consumption-Saving Puzzles in a Unified Framework," Vanderbilt University Department of Economics Working Papers 0716, Vanderbilt University Department of Economics.
    15. Kam-Ki Tang & Benjamin ShiJie Wong, "undated". "The Ageing, Longevity and Crowding Out Effects on Private and Public Savings: Evidence from Dynamic Panel Analysis," MRG Discussion Paper Series 3409, School of Economics, University of Queensland, Australia.
    16. Hugo Benitez-Silva, 2000. "A Dynamic Model Of Labor Supply, Consumption/Saving, And Annuity Decisions Under Uncertainty," Computing in Economics and Finance 2000 128, Society for Computational Economics.
    17. Hugo Benítez-Silva, 2003. "The Annuity Puzzle Revisited," Working Papers wp055, University of Michigan, Michigan Retirement Research Center.
    18. Mr. Francesco Grigoli & Alexander Herman & Klaus Schmidt-Hebbel, 2014. "World Saving," IMF Working Papers 2014/204, International Monetary Fund.
    19. Olafsson, Arna & Pagel, Michaela, 2024. "Retirement puzzles: New evidence from personal finances," Journal of Public Economics, Elsevier, vol. 234(C).
    20. Charles Yuji Horioka, 2021. "Is the selfish life-cycle model more applicable in Japan and, if so, why? A literature survey," Review of Economics of the Household, Springer, vol. 19(1), pages 157-187, March.
    21. Karen A. Kopecky, 2011. "The Trend In Retirement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 287-316, May.
    22. Velarde, Melanie & Herrmann, Roland, 2014. "How retirement changes consumption and household production of food: Lessons from German time-use data," The Journal of the Economics of Ageing, Elsevier, vol. 3(C), pages 1-10.
    23. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joecag:v:3:y:2014:i:c:p:21-28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-journal-of-the-economics-of-ageing .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.