NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Longevity and Life Cycle Savings

David E. Bloom, David Canning, Bryan Graham

NBER Working Paper No. 8808
Issued in February 2002
NBER Program(s):   AG

We add health and longevity to a standard model of life cycle saving and show that, under plausible assumptions, increases in longevity lead to higher savings rates at every age, even when retirement is endogenous. In a stable population these higher savings rates are offset by increased old age dependency, but during the disequilibrium phase, when longevity is rising, the effect on aggregate savings rates can be substantial. Our results explain the boom in savings in East Asia during 1950-90 as a combination of rising life expectancy and falling youth dependency, though they predict that savings in the region will return to more normal levels as populations age. We also find that falling life expectancies in Africa are associated with declining savings rates.

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Document Object Identifier (DOI): 10.3386/w8808

Published: David E. Bloom & David Canning & Bryan Graham, 2003. "Longevity and Life-cycle Savings," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(3), pages 319-338, 09. citation courtesy of

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