Working Paper: NBER ID: w12621
Authors: David E. Bloom; David Canning; Rick Mansfield; Michael Moore
Abstract: In theory, improvements in healthy life expectancy should generate increases in the average age of retirement, with little effect on savings rates. In many countries, however, retirement incentives in social security programs prevent retirement ages from keeping pace with changes in life expectancy, leading to an increased need for life-cycle savings. Analyzing a cross-country panel of macroeconomic data, we find that increased longevity raises aggregate savings rates in countries with universal pension coverage and retirement incentives, though the effect disappears in countries with pay-as-you-go systems and high replacement rates.
Keywords: demographic change; social security; savings; life expectancy
JEL Codes: E1; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased longevity (D15) | higher aggregate savings rates (E21) |
| universal pension coverage and retirement incentives (H55) | higher aggregate savings rates (E21) |
| pay-as-you-go systems and high replacement rates (H55) | no positive effect of longevity on savings rates (D15) |
| longer life spans (D15) | longer retirement periods (J26) |
| longer retirement periods (J26) | greater pre-retirement savings (D14) |
| absence of social security systems (H55) | extend working life (J26) |
| extend working life (J26) | lower savings rates (D14) |