Demographic Change, Social Security Systems, and Savings

David E. Bloom, David Canning, Rick Mansfield, Michael Moore

NBER Working Paper No. 12621
Issued in October 2006
NBER Program(s):Economics of Aging, Economic Fluctuations and Growth, , Labor Studies, , Public Economics

In theory, improvements in healthy life expectancy should generate increases in the average age of retirement, with little effect on savings rates. In many countries, however, retirement incentives in social security programs prevent retirement ages from keeping pace with changes in life expectancy, leading to an increased need for life-cycle savings. Analyzing a cross-country panel of macroeconomic data, we find that increased longevity raises aggregate savings rates in countries with universal pension coverage and retirement incentives, though the effect disappears in countries with pay-as-you-go systems and high replacement rates.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w12621

Published: 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. citation courtesy of