TY - JOUR AU - Gokhale,Jagadeesh AU - Kotlikoff,Laurence J. AU - Sabelhaus,John TI - Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 5571 PY - 1996 Y2 - May 1996 UR - http://www.nber.org/papers/w5571 L1 - http://www.nber.org/papers/w5571.pdf N1 - Author contact info: Jagadeesh Gokhale Senior Fellow CATO Institute 1000 Mass. Ave., NW Washington, DC 20001 E-Mail: jgokhale@cato.org Laurence J. Kotlikoff Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4002 Fax: 617/353-4001 E-Mail: kotlikoff@gmail.com John Sabelhaus Federal Reserve Board 20th and C Streets NW Washington DC 20551 E-Mail: john.sabelhaus@frb.gov AB - Since 1980, the U.S. net national saving rate has averaged less than half the rate observed in the 1950s and 60s. This paper develops a unique cohort data set to study the decline in U.S. national saving. It decomposes postwar changes in U.S. saving into those due to changes in cohort-specific consumption propensities, those due to changes in the intergenerational distribution of resources, those due to changes in government spending on goods and services, and those due to changes in demographics. Our findings are striking. The decline in U.S. saving can be traced to two factors: The redistribution of resources from young and unborn generations with low or zero propensities to consume toward older generations with high consumption propensities, and a significant increase in the consumption propensities of older Americans. Most of the redistribution to the elderly reflects the growth in Social Security, Medicare, and Medicaid benefits. The increase in the elderly's consumption propensities may also reflect government policy, namely the fact that Social Security, Medicare, and Medicaid benefits are paid in the form of annuities and that, in the case of Medicare and Medicaid, the annuities are in-kind and must, therefore, be consumed. ER -