Consumption Structure, Welfare Goods and Retirement Income: Linking the Ageing Puzzles

IFD Working Paper No. 22

25 Pages Posted: 13 Jun 2008 Last revised: 11 Jun 2015

See all articles by Najat el Mekkaoui De Freitas

Najat el Mekkaoui De Freitas

Université Paris-Dauphine, Laboratoire d'Economie, DIAL ; Economic Research Forum (ERF)

Joaquim Oliveira Martins

OECD; University Paris-Dauphine - PSL

Date Written: June 1, 2008

Abstract

While the empirical evidence tends to support some predictions of the life-cycle theory, a number of puzzles remain: an ageing-consumption, an ageing-saving and a saving-capitalisation puzzles have been put forward in the literature. This paper analyses the links between these three puzzles and develops a model relating usual life-cycle variables, social transfers (public health care expenditures and the generosity of pension systems) to the level of savings. A reduced-form model using a panel of 18 OECD countries is tested, confirming the proposed explanations for the puzzles, together with other factors such as Ricardian equivalence and the population structure. We found that the relative generosity of welfare systems have a significant negative impact on household saving rate.

Keywords: Ageing populations, Longevity, Consumption, Saving

JEL Classification: C68, D91, G10, J11, J26

Suggested Citation

De Freitas, Najat el Mekkaoui and Oliveira Martins, Joaquim, Consumption Structure, Welfare Goods and Retirement Income: Linking the Ageing Puzzles (June 1, 2008). IFD Working Paper No. 22, Available at SSRN: https://ssrn.com/abstract=1145145 or http://dx.doi.org/10.2139/ssrn.1145145

Najat el Mekkaoui De Freitas

Université Paris-Dauphine, Laboratoire d'Economie, DIAL ( email )

Place du Marechal de Lattre Tassigny
Paris
France
+33144054613 (Phone)

Economic Research Forum (ERF) ( email )

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(P.O. Box: 12311)
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Egypt

Joaquim Oliveira Martins (Contact Author)

OECD ( email )

2 Rue André Pascal
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France
+33 1 45 24 88 53 (Phone)

HOME PAGE: http://www.oecd.org/cfe

University Paris-Dauphine - PSL ( email )

PARIS
France

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