Dependency Rates and Private Savings Behavior in Developing Countries

International Monetary Fund

No 1988/010, IMF Working Papers from International Monetary Fund

Abstract: A firm theoretical basis for the empirical relationship between dependency rates and savings behavior in developing countries is still lacking. Two demographic extensions of the representative household’s stochastic dynamic optimization problem are presented here. It is shown that the relationship between expected dependency rates and consumption growth depends on two parameters: the demographically varying committed consumption and the intertemporal elasticity of substitution. Thus, the expected path of demographic variables can provide information on the consumers’ willingness to smooth consumption, and on the savings responsiveness to changes in the real interest rate.

Keywords: WP; rate of return; utility function; dependency rate; representative consumption unit; consumption path; dummy variable; rate of growth; Consumption; Income; Private consumption; Southern Europe; Central America; Sub-Saharan Africa; Caribbean; South America (search for similar items in EconPapers)
Pages: 18
Date: 1988-01-01
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