The moderating role of financial development in the nexus between population aging and saving

Dong-Hyeon Kim (), Peiyao Liu () and Shu-Chin Lin ()
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Dong-Hyeon Kim: Korea University
Peiyao Liu: Sungkyunkwan University
Shu-Chin Lin: Sungkyunkwan University

Economic Change and Restructuring, 2024, vol. 57, issue 2, No 55, 32 pages

Abstract: Abstract The paper empirically investigates the saving consequence of population aging, an issue that is important for policymaking and still far from uncontroversial. Rather than providing another piece of evidence to verify the positive or negative correlation between population aging and saving, the contribution of the paper is to consider the moderating role of financial development in the nexus. In a cross-country panel data setting, we find that population aging proxied by old-age dependency decreases saving, but the effect diminishes with financial development. The opposite is found for life expectancy. Financial development weakens the saving-increasing effect of life expectancy. The findings hold for different types of saving and controlling for per-capita income growth. The data suggest that life expectancy may offset the effect of old-age dependency, limiting the influence of population aging on saving. The evidence also suggests that financial development constrains the saving effect of population aging and the need to consider a country’s extent of financial development to address the saving consequence as a population ages.

Keywords: Population aging; National saving; Private saving; Government saving; Financial development (search for similar items in EconPapers)
JEL-codes: E21 G51 J11 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10644-024-09670-5

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