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Population growth and savings rates: Some new cross-country estimates

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  • Christopher Cook

Abstract

It is widely recognised that population growth can have two conflicting effects on savings. It reduces savings as it leads to more dependent children, but if balanced it can also increase savings by increasing the number entering the working part of the life cycle and hence the number of potential savers. However, this positive effect has largely been ignored in the empirical literature. Based on the population growth rate as its measure and an augmented cross-country life cycle regression model evidence for its existence is confirmed. Confidence in the estimates is undermined by tests indicating that in many countries over the relevant period population growth was not in steady state balance. This is ameliorated by the high regression R2s and by comparable labour force growth rate estimates, but it was also found that the estimates could not be interpreted as evidence that countries with more rapid population growth rates actually save more. This is because the negative impact of larger families was found to outweigh any increase in savings because of more families. The net elasticity effect was calculated to be - 0.08. The paper concludes that savings continues to be a cost of rapid population growth, but perhaps not quite as debilitating as some might have presumed.

Suggested Citation

  • Christopher Cook, 2005. "Population growth and savings rates: Some new cross-country estimates," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 301-319.
    • Handle: RePEc:taf:irapec:v:19:y:2005:i:3:p:301-319
    DOI: 10.1080/02692170500119755
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    References listed on IDEAS

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    1. Christopher Cook, 2002. "Public Versus Private Savings Rates in LDCs: Please Effects in recent development," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(4), pages 435-449.
    2. Hammer, Jeffrey S., 1986. "Children and savings in less developed countries," Journal of Development Economics, Elsevier, vol. 23(1), pages 107-118, September.
    3. Bilsborrow, Richard E, 1979. "Age Distribution and Savings Rates in Less Developed Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 28(1), pages 23-45, October.
    4. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
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