Pension funds saving individuation

This paper considers a pension insurance problem using an intertemporal framework. We assume a deterministic framework in order to obtain tractable and yet revealing results regarding the propensity to save for retirement. The essential conclusions of this paper include a condition for a single switch, that is, when the saver will decide the switching time, prior to retirement, to start saving. Because of the linear objective used in this paper, saving rates were found to be of the bang-bang type. In addition, we show that the tax effects are important. The richer the saver, the greater the tax advantages for pension savings.     

The determinants of household and private savings in Thailand

A broad set of possible determinants of household and private savings behaviour is examined through an in-depth case study of Thailand during the period 1960 to 2004. Results suggest that an increase in economic growth, inflation and terms of trade all have a significant positive impact on household and private saving rates. In contrast, the availability of bank credit tends to reduce household and private saving rates. While an increase in both old and young dependency has a negative impact on household and private saving rates, the magnitude of the impact on the former is far greater than that on the latter. Furthermore, public saving seems to crowd out household and private saving, but less than proportionately. This reflects a possible role of fiscal policy in increasing national savings in the economy. Over and above these variables, corporate saving is another important determinant of household saving. An increase in the former brings about a significant reduction in the latter.     

Pension reforms and saving gains in the United Kingdom

The empirical validity of the effect of pension reforms on domestic savings in the UK has been investigated using an Auto‐regressive Distributed Lag (ARDL) model capable of testing for the existence of a long‐run relationship regardless of whether the underlying time series are individually I(1) or I(0). The total savings response to change in pension savings is positive and significant, but an increase in occupational pension saving appears offset by a decrease in other forms of saving. This paper concludes that there is no firm evidence that aggregate savings increase considerably because of privately funded pension schemes.     

The Effects of A Continuous Increase in Lifetime on Saving

This paper examines the effects on saving of a continuous increase in lifetime and shows that a greater increase in lifetime leads to greater savings. This is because an increase in lifetime is accompanied by uncertainty and because the working-age cohort whose lifetime is longer saves more than the retired cohort dissaves. This result is tested empirically with cross-country data, and it is confirmed that an increase in life expectancy has a positive effect on various saving rates.     

Uncertain Pension Income and Household Saving

This paper investigates the relationship between household saving and pensions, and estimates both the displacement effect of pensions on private saving and the precautionary saving effect due to uncertainty in pension income. I estimate the savings equation implied by a simple life‐cycle model featuring income uncertainty using survey data for Dutch households, with subjective expectations on pension benefits and uncertainty. Exploiting exogenous variation due to pension fund performance, I find that households save significantly more due to uncertainty in pension income. Not controlling for uncertainty biases the estimated displacement effect of pensions on private savings towards zero.     

Effects of longevity and dependency rates on saving and growth: Evidence from a panel of cross countries

While earlier empirical studies found a negative saving effect of old-age dependency rates without considering longevity, recent studies have found that longevity has a positive effect on growth without considering old-age dependency rates. In this paper, we first justify the related yet independent roles of longevity and old-age dependency rates in determining saving and growth by using a growth model that encompasses both neoclassical and endogenous growth models as special cases. Using panel data from a recent World Bank data set, we then find that the longevity effect is positive and the dependency effect is negative in savings and investment regressions. The estimates indicate that the differences in the demographic variables across countries or over time can well explain the differences in aggregate savings rates. We also find that both population age structure and life expectancy are important contributing factors to growth.     

On myopia as rationale for social security

It has been argued that “paternalistically motivated forced savings constitutes an important, and to some the most important, rationale for social security retirement systems.” This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go (PAYG) social security in dynamically efficient economies. If the competing asset is linear storage and myopic agents are allowed to borrow against future pension benefits, there is no welfare-rationale for PAYG pensions. Sufficiently strong myopia may justify such pensions only if agents cannot borrow against their future pension, but then they are at a zero-saving corner. With enough myopia, co-existence of positive optimal pensions and positive private saving is possible if the return to saving declines with saving, as in a model with a neoclassical technology.     

An empirical analysis of household savings in France 1984–1998

In this paper we analyse the saving behaviour of French households by cohort and by age. We exploit two data sets: the Household Budget Surveys (HBS) allow us to define saving as residual of income minus consumption, while the Financial Assets Surveys (FAS) give us saving as changes in wealth. We make use of both financial assets surveys, gross them up using national accounts, and distinguish between “active” and “passive” saving.In France, tax policies appear to be one of the main factors that explain the recent evolution of household saving rates. The complex tax treatment of savings and capital income as well as the way in which households perceive the future of the French retirement pension system (5) also help to explain the composition of active and passive saving.     

Who is saving privately for retirement and how much? New evidence for Germany

Due to demographic change, the replacement rates of the German statutory pension scheme will decrease over the next decades. Voluntary savings for retirement will therefore increase in relevance as a method of maintaining one’s standard of living during retirement. This article examines the savings behavior for retirement on an individual level in Germany at the extensive as well as the intensive margin. First, the decision to save in general is analyzed, showing that the main determinants for saving are personal income and disposable household income. Furthermore, it is shown that migrants and individuals living in the Eastern part of Germany turn out to be less likely to have additional private savings. Second, the chosen gross saving rates are analyzed using a Tobit model, a log-normal hurdle model and a Type II Tobit model. The results suggest that the decision to save in general, as well as the saving rate, are independent of each other, leading to a loss of information if only a standard Tobit model is used. For example, higher personal income increases the probability to save for retirement, but decreases the resulting saving rate. Modeling both decisions separately thus, leads to a better understanding of the determinants of saving for old-age.     

Longevity and Life‐cycle Savings*

We add health and longevity to a standard model of life‐cycle saving and show that, under plausible assumptions, increases in life expectancy lead to higher savings rates at every age, even when retirement is endogenous. In a stationary population these higher savings rates are offset by increased old age dependency, but during the disequilibrium phase, when longevity is rising, the effect on aggregate savings rates can be substantial. We find empirical support for this effect using a cross‐country panel of national savings rates.     

Public pension and household saving: Evidence from urban China

We relate household savings to pension reform, to explain the high household savings rates in urban China from a new perspective. We use the exogenous – policy-induced – variation in pension wealth to estimate explicitly the impact of pension wealth on household savings, and obtain evidence of a significant offset effect of pension wealth on household savings. Although the size of the effect depends on the parameter values assumed, the finding that household savings are affected by pension reform is robust. Our estimates show that, under plausible scenarios, pension reform boosted household savings rates in 1999 by about 6–9 percentage points for cohorts aged 25–29 and by about 2–3 percentage points for cohorts aged 50–59. Our results also indicate that declining pension wealth reduces expenditure on education and health more than on other consumption items.     

Determinants of Household Savings: A Cross-Country Analysis

This paper analyses determinants of household savings in a model based on an extension of the disequilibrium savings theory. These extensions follow from the life-cycle and permanent-income theories. Based on panel data for 14 countries spanning the period 2000–2018, fixed-effect least squares and two-stage least squares estimation procedures were used. In line with previous studies, there is strong and robust evidence for the hypotheses of disequilibrium savings theory, specifically, positive effects of unanticipated income changes, unanticipated inflation and the lagged savings rate. There is also robust evidence for the income uncertainty hypothesis that uncertainty has a positive effect on savings. The analysis presents some evidence that social security suppresses savings, but finds no significant effects on the interest rate or old-age dependency ratio. Unexpectedly, the participation rate of the elderly has a significant positive effect in some specifications. These findings contribute to the debate on whether and how governments can influence saving behavior.

     

Savings and investment in Australia

It has become popular to advocate tax reduction on the basis of promoting savings, investment and ultimately economic growth. The linkage between the variables is argued by various neoclassical growth models and is further suggested by recent studies which highlight the close association between domestic saving and investment rates. The close association may allow for polices which alter domestic saving levels in order to alter domestic investment levels. This interpretation, however, presumes an endogenous investment response. Equally likely, theoretically, is that the close association is maintained by movements in national savings. The present paper explicitly examines the endogeneity of the Australian saving and investment rates. The results highlight the exogeneity of investment. The results further suggest an endogenous response on the part of Australia's saving rate. The results may limit the potential benefits of these tax changes.     

Tax Policy and Human Capital Formation with Public Investment in Education

This paper studies the effects of distortionary taxes and public investment in an endogenous growth OLG model with knowledge transmission. Fiscal policy affects growth in two respects: first, work time reacts to variations of prospective tax rates and modifies knowledge formation; second, public spending enhances labour efficiency but also stimulates physical capital through increased savings. It is shown that Ramsey-optimal policies reduce savings due to high tax rates on young generations, and are not necessarily growth-improving with respect to a pure private system. Non-Ramsey policies that shift the burden on adults are always growth-improving due to crowding-in effects: the welfare of all generations is unambiguously higher with respect to a private system, and there generally exists a continuum of non-optimal tax rates under which long-run growth and welfare are higher than with the Ramsey-optimal policy.     

The relationship ageing of the population and saving in an unemployment context: Empirical evidence using an autoregressive distributed lag bounds testing approach

In this article, we emphasised that ageing population does not systematically depress savings by drawing attention to the factors that may distort that prediction of the life‐cycle hypothesis (LCH). To demonstrate it, we used two indicators for ageing: the total and aged dependency ratios and we looked at the economic context influence on national saving evolution through considering the labour market imbalance interference. By applying the autoregressive distributed lag approach, with Tunisian data during 1970–2018, a dynamic long‐run relationship between ageing and national saving is found, although it seemed to be sensitive to the used ageing indicator and the economic context. Indeed, the LCH is proved only by the total dependence ratio whereas the aged dependence ratio puts a significant long‐run upward pressure on saving. Further, in a context of unemployment without any benefit scheme, the LCH prediction cannot be endorsed by the two indicators. Hence, the social and economic conditions limit the LCH scope, bearing out that elderly not depress systematically savings. Therefore, to sustain saving major economic and financial reforms are needed, as to postpone the retirement age, to move from pay‐as‐you‐go system towards funded pension system, to promote life insurance and to diversify the long‐run savings products.     

经济增长、人口结构变化与中国高储蓄

本文以生命周期理论为出发点,并运用中国1989—2006年的省际面板数据考察了经济增长、人口年龄结构变化以及它们的交互作用对中国储蓄率的影响。我们通过不同的识别方式和各种计量方法实证检验发现:市场经济转型带来的经济高速增长与人口政策转变带来的抚养系数下降导致中国储蓄率不断上升,经济增长对储蓄率上升的贡献随着适龄劳动人口数量的增加而被强化,但会随着人口老龄化程度的加深而被弱化。在使用了不同的识别方法与计量技术并控制了其他潜在影响中国储蓄率的各种因素后,我们的结果基本稳健。     

Technical Change in a Model with Fair Wages and Unemployment

This paper uses a variable rate-of-growth model of life-cycle saving as developed by Fry and Mason (1982) to show that demographic factors were behind the rapid rise in saving in Japan, Korea, and Taiwan. The steady decline in the population dependency ratio in an environment of rapid economic growth was the determining factor driving the trend rise in savings in these three countries. Furthermore, demographic trends can also explain the difference in saving ratios in Japan, Korea, and Taiwan. When one compares these countries at the same stage in their development, Koreans did save "little" relative to Japan, but not relative to Taiwan, and this difference in saving can be explained by Korea's higher rate of dependency. [E21, N15]     

Precautionary Savings in Mexico: Evidence From the Mexican Health and Aging Study

Precautionary saving is the additional saving done by individuals to protect them financially in situations of uncertainty and reduce their vulnerability for negative shocks that may affect their consumption levels. This paper investigates the existence and extent of savings motivated by precaution in Mexico for people aged between 50 and 75, using data from the Mexican Health and Ageing Study 2003. The empirical strategy is based on a test of the direct relationship between the accumulated wealth and the uncertainty generated by the social security status, in particular the availability of health insurance, accounting also for the expectation to receive a retirement pension. The endogeneity‐corrected estimates do not yield results that unequivocally support the existence of private savings as a risk protection mechanism, implying that the public protection system has an important role in reducing the vulnerability of the population studied.     

Voting over type and generosity of a pension system when some individuals are myopic

This paper studies the determination through majority voting of a pension scheme when society consists of far-sighted and myopic individuals. All individuals have the same basic preferences but myopics tend to adopt a short-term view (instant gratification) when dealing with retirement saving and labor supply. Consequently, they will find themselves with low consumption after retirement and regret their insufficient savings decisions. Henceforth, when voting they tend to commit themselves into forced saving. We consider a pension scheme that is characterized by two parameters: the payroll tax rate (that determines the size or generosity of the system) and the “Bismarckian factor” that determines its redistributiveness. Individuals vote sequentially. We examine how the introduction of myopic agents affects the generosity and the redistributiveness of the pension system. Our main result is that a flat pension system is always chosen when all individuals are of one kind (all far-sighted or all myopic), while a less redistributive system may be chosen if society is composed of both myopic and far-sighted agents. Furthermore, while myopic individuals tend to prefer larger payroll taxes than their far-sighted counterparts, the generosity of the system does not always increase with the proportion of myopics.     

Portfolio Choice under Uncertain Lifetime

This paper revisits the theory on life cycle savings and portfolio choice under uncertain lifetime emphasizing the role of temporal risk aversion. It provides new insights on the impact of mortality rates on optimal financial strategies. This is of particular interest for the management of pension funds.