Time constraints, saving and old age

Thomas Davoine

No 1221, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: Abstract I take seriously the hypothesis that the wealthy lack time to consume to explain empirical evidence on old age asset decumulation and rich savings rates. Basic life-cycle theory predicts that households run down their assets toward the end of their life but evidence shows they do it at a very low rate. Under homothetic preferences, this theory also predicts that rich and poor save at the same rate, inconsistent with empirical evidence. Other existing models are also inconsistent with both evidence at the same time. Integrating a Becker home production model in Ramsey growth theory, I show that time constraints can explain the evidence on savings rate and asset decumulation, as well as some other evidence difficult to rationalize.

Keywords: Time constraints; home production; neoclassical growth theory; savings rate; old age asset decumulation (search for similar items in EconPapers)
JEL-codes: D9 E21 J14 J22 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2012-08
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2012:21

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