Do ageing economies save less? Evidence from OECD data

Abstract

Purpose

The purpose of this paper is to re‐examine the effect of population ageing on private saving, taking into account the fact that ageing is brought about by not only rising old‐aged dependency but also expanding longevity.

Design/methodology/approach

The study uses panel data of 22 OECD countries from 1961 to 2010. Linear and non‐linear panel regression methods are used. The study takes into account the time series characteristic of the data, such as the deterministic trend present in old‐age dependency ratio.

Findings

Longevity consistently has a significant positive impact on savings, while old‐aged dependency rate has no discernible impact once country‐specific time trends in the data are accounted for. The general finding within the literature where old‐age dependency exerts a negative impact on savings is sensitive to the manner in which the data is handled and/or the sample selected.

Originality/value

First, the authors jointly consider rising old‐aged dependency and expanding longevity on savings, thus avoiding potential omitted variable bias in previous studies. Second, they explore non‐linearity in the savings‐ageing relationship which was ignored previously. Third, they identify whether saving rate and demographic measures are sharing common stochastic trends or driven by individual deterministic trends to avoid spurious regression results.

Citation

Wong, B. and Ki Tang, K. (2013), "Do ageing economies save less? Evidence from OECD data", International Journal of Social Economics, Vol. 40 No. 6, pp. 591-605. https://doi.org/10.1108/03068291311321875