The Effect Of Life Expectancy On Savings Rate

Savings problem is an important issue in macroeconomics and it involves all aspects of the entire economic system. The savings is an important factor that affects one country’s economic growth, so the study of changes in the savings rate and factors that can decide savings has important significance. Among those factors that influence the savings, the impact of the structure changes of population on savings rates and the economic growth arouses more and more attention. Among them, since the1960s, with the rapid development of economy, the quality of life is improved and the level of health and medical care is also greatly improved. As a result, the life expectancy of the world population is significantly extended. The longer life expectancy will change the residents’savings and consumption behaviors and affect savings-consumption patterns and the savings rate. The influence of life expectancy on savings rate is more and more obvious, at the same time, more and more research focus on this aspect at home and abroad. Some scholars believe that the life expectancy has a positive impact on savings and some hold opposite view. Besides, some scholars believe that the impact of life expectancy on savings is uncertain for the impacts may be different in different stages of economic development.This paper first introduces Bloom, Canning and Graham’s model about the savings and life expectancy, proving that the impact of life expectancy on savings rate is not sure because this two may be positive related and also may be negative related. In the empirical part, this paper abides by Modigliani’s life cycle hypothesis and Friedman’s permanent income hypothesis and use the quantitative analysis method. The paper chooses30years data (from1960-2009) through61countries and regions around the world as a sample and use panel data estimate method to study the sample. The paper takes the trade of GDP into consideration and studies the impact of life expectancy change on savings under the open economy condition. After analysis we find that:life expectancy has a negative impact on savings rate--with life expectancy extended, the household savings rate has been reduced.