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Are there any prospects for a long-term savings program for citizens? The role of political stability, corruption and confidence in the future

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  • Nepp, A.

    (Federal State Autonomous Educational Institution of Higher Education "Ural Federal University named after the first President of Russia B. N. Yeltsin", Ekaterinburg, Russia)

Abstract

We investigate the impact of political stability, corruption, and future confidence on retirement savings using a fixed effects method and data on 36 countries over the period from 2000 to 2019. Our study complements works in precautionary savings theory. We find a negative relationship between political stability, confidence in future and the retirement savings rate. The retirement savings rate is found to be lower in countries with higher corruption. In countries with higher inflation, unemployment and low-income countries, we observed a stronger impact of political stability, corruption and confidence in the future on pension saving rates. We find that lower political stability amid social tensions and lower unemployment will contribute to the development of a long-term savings program. However, the growth of corruption and rising inflation will act as deterrents. In developing countries, which the World Bank considers Russia to be in terms of income, the increase in pension savings in case of decreasing political stability can be replaced by alternative types of savings - foreign currency, food etc. The effects will be intensifi ed, firstly, by a decrease in public confidence in the authorities in the field of pension reforms and because of the earlier "freezing" of the funded part of the pension. Secondly, the growth of corruption will be a factor intensifying the negative effect. Thirdly under the shock events, the behavior of the population according to the theory of behavioral finance will deviate from the rational theory of preventive savings. Based on the results of our study, we are skeptical about the prospects of the long-term savings program introduced in January 2024.

Suggested Citation

  • Nepp, A., 2024. "Are there any prospects for a long-term savings program for citizens? The role of political stability, corruption and confidence in the future," Journal of the New Economic Association, New Economic Association, vol. 65(4), pages 156-176.
    • Handle: RePEc:nea:journl:y:2024:i:65:p:156-176
    DOI: 10.31737/22212264_2024_4_156-176
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    More about this item

    Keywords

    long-term savings program; pension savings; saving behavior; political stability; corruption; confidence in the future;
    All these keywords.

    JEL classification:

    • G5 - Financial Economics - - Household Finance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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