Demographics, Fiscal Policy, and U.S. Saving in the 1980s and Beyond

47 Pages Posted: 18 Apr 2007 Last revised: 12 Aug 2010

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Date Written: October 1989

Abstract

This paper focuses on U.S. saving, demographics, and fiscal policy. We use data from the Consumer Expenditure Surveys of the 1980s to consider the effect of demographic change on past and future U.S. saving rates. Our findings indicate that demographic change may significantly alter the U.S. rate of national saving and current account position over the next 50 years. The gradual aging of the population is predicted to lead to higher saving rates over the next three decades with declines in the rate of saving thereafter. Associated with these predicted saving rate changes is a predicted improvement in the U.S. current account position is the 1990s, with a very gradual deterioration during the subsequent decades. While demographics is a potentially very important factor in explaining saving, it does not appear to explain the drop in the U.S. saving rate in the 1980s. What happened to U.S. saving in the 1980s remains an intriguing puzzle.

Suggested Citation

Auerbach, Alan Jeffrey and Kotlikoff, Laurence J., Demographics, Fiscal Policy, and U.S. Saving in the 1980s and Beyond (October 1989). NBER Working Paper No. w3150. Available at SSRN: https://ssrn.com/abstract=980449

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Gaidar Institute for Economic Policy

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Russia

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