Working Paper: NBER ID: w3150
Authors: Alan J. Auerbach; Laurence J. Kotlikoff
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.
Keywords: US saving; demographics; fiscal policy; current account
JEL Codes: E21; H55; J11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| demographic changes (J11) | saving rates (E43) |
| demographic aging (J11) | increased saving rates (D14) |
| saving rates (E43) | current account balances (F32) |
| fiscal policies + demographic changes (J18) | government consumption (E20) |
| fiscal policies + demographic changes (J18) | saving rates (E43) |
| demographics (J11) | low saving rates in the 1980s (E65) |