LIFE-CYCLE INCOME HYPOTHESIS AND DEMOGRAPHIC STRUCTURE: A SEMI-NONPARAMETRIC ANALYSIS USING A PANEL OF COUNTRIES

Cheolbeom Park and Jina Yu ()
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Jina Yu: Broadcasting & Spectrum Policy Research Division, Korea Information Society Development Institute (KISDI), 38 Youngmeori 2 gil (1-1 Juam-dong), Gwacheon-si, Gyeonggi-do, Republic of Korea 427-710, Republic of Korea

The Singapore Economic Review (SER), 2013, vol. 58, issue 01, 1-18

Abstract: In this paper, we attempt to determine whether the life-cycle income (LCI) hypothesis can explain movements in the national savings rate using the panel data of countries and the semi-nonparametric approach. While relating movements in the population density function to movements in the national savings rate, we are able to estimate the age response function with a high level of precision, and the estimated age response function is hump-shaped, which is generally consistent with the prediction from the LCI hypothesis. Running time-series regressions separately for individual countries, we also demonstrate that the estimated age response functions are consistent with the LCI hypothesis in a large proportion of countries, despite limited observations in a variety of countries. Finally, our time-series and cross-sectional analysis results imply that the LCI hypothesis is more likely to hold in a country wherein the growth rate of per capita GDP and the growth rate of population are high.

Keywords: Age distribution; Fourier flexible form; life-cycle income hypothesis; semi-nonparametric regression; series estimation; E21; D91; C14 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1142/S0217590813500033

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