Document Type

Article

Publication Date

1-1-2003

Published In

Southern Economic Journal

Abstract

After briefly examining the various proposed causes for the decline in the U.S. personal saving rate in the past decade, this essay then argues that a shift in the demographic composition of the population will be a much more important cause for a decline in personal saving in the future. A change in the balance between those in the labor force who are saving and retirees who are dissaving will result in a considerable fall in the aggregate saving rate under most assumptions. The simulation model used to examine this phenomenon takes into account the interest rate, the growth rate of the economy, the retirement age, the growth of population, and the life expectancy. Attention is also given to certain consequences of the fall in the saving rate, such as changes in the interest rate, changes in asset prices, and a decline in the GDP growth rate.

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This work is freely available courtesy of the Southern Economic Association.

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