Aging On Saving Rate-an Empirical Study From 24 OECD Countries

This paper focuses on the effect of aging on saving. Saving is a decision about today’s consuming and tomorrow’s consuming. This decision will affect a country’s economic development and civil living standard. According to neoclassical economic theory, when a country has high saving rate, it will have high economic growth rate in the future, so the living standard of their people will become well. Aging is a phenomenon accompanied with economic growth and development of medicine care. It is a state when ratio of the old becomes big. It is a general condition that when the share of people over 60 years old is beyond 10%, or the share of people over 65 years old is beyond 7%, it means that this country enters aging society. In general, aged people have negative saving, so aging has a negative effect on saving rate. This will lower economic growth rate. This article sums up related papers about aging on saving rate, especially the classical theory about saving. Then I extend Solow model, Life Cycle model and Precaution Saving model. Next is the critical part of this paper. I gather 24 OECD countries’data, from 1973 to 2005, and construct a saving function with average GDP, economic growth rate, old dependency rate and child dependency rate. I use panel data method to analyze these data and get a conclusion that aging has negative effect on saving.