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The effects of age and cohort on household saving

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  • Mäki-Fränti, Petri

Abstract

According to the standard life cycle model, household saving rate should peak at the best working age and turn then to decline so that households dissolve their savings after retirement. This study examines, how age and birth cohort affect the saving behavior of the Finnish households. A synthetic panel data is used to estimate an empirical age-cohort-period model of income, consumption and saving rate of the households. The results suggest that the Fnnish households continue saving even in the old age and younger cohohorts tend to save more than the older ones. Thus, a projected aggregate saving rate of the Finnish economy will slightly increase during the next two decades.

Suggested Citation

  • Mäki-Fränti, Petri, 2022. "The effects of age and cohort on household saving," BoF Economics Review 6/2022, Bank of Finland.
    • Handle: RePEc:zbw:bofecr:62022
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    References listed on IDEAS

    as
    1. Tullio Jappelli & Franco Modigliani, 2006. "The Age–Saving Profile and the Life-Cycle Hypothesis," Chapters, in: Lawrence R. Klein (ed.), Long-run Growth and Short-run Stabilization, chapter 2, Edward Elgar Publishing.
    2. Angus Deaton & Christina Paxson, 2000. "Growth and Saving Among Individuals and Households," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 212-225, May.
    3. Mark Vink, 2014. "Intergenerational Developments in Household Saving Behaviour," Treasury Working Paper Series 14/23, New Zealand Treasury.
    4. Finlay Richard & Price Fiona, 2015. "Household saving in Australia," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 677-704, July.
    5. Orazio P. Attanasio, 1998. "Cohort Analysis of Saving Behavior by U.S. Households," Journal of Human Resources, University of Wisconsin Press, vol. 33(3), pages 575-609.
    6. David Demery & Nigel Duck, 2006. "Savings–age profiles in the UK," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(3), pages 521-541, July.
    7. Päivi Kankaanranta, 2019. "A Cohort-Analysis of Age-Wealth Profile in Finland," Discussion Papers 130, Aboa Centre for Economics.
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    More about this item

    Keywords

    population aging; household saving; age-cohor-period models; synthetic cohort;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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