Rate of Growth of Population, Saving and Wealth in the Basic Life-cycle Model when the Household is the Decision Unit

Carlo Casarosa () and Luca Spataro
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Carlo Casarosa: Università di Pisa

No 64, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: In this paper we explore the impact of the life-cycle dynamics of family composition on the aggregate wealth-income ratio and on the aggregate propensity to save in the hypothesis of life-cycle behaviour. We depart from Modigliani-Brumberg’s basic model by assuming that the household, rather than the individual, is the relevant economic unit. In this framework we first explore the single household’s life-cycle paths of consumption, saving and wealth and point out the impact on such paths of the timing of births and of the rearing period of the children. We then show that both in a stationary economy and in economy with a steadily growing population the life-cycle dynamics of family composition affects strongly the aggregate wealth-income ratio and the distribution of wealth among the age-cohorts. Further and more importantly, we show that in an economy with a steadily growing population the aggregate propensity to save and the rate of growth of population move in opposite directions for a wide range of values of the timing of births and of the number of children per-household.

Keywords: Life-Cycle; Saving; Timing of Births; Population Growth (search for similar items in EconPapers)
JEL-codes: D31 D91 J13 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-10
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Persistent link: https://EconPapers.repec.org/RePEc:crp:wpaper:64

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