Gone with the wind: Demographic transitions and domestic saving

Abstract

AbstractThis study explores the relationship between demographic factors and saving rates using a panel dataset covering 110 countries between 1963 and 2012. In line with predictions from theory, this paper finds that, on average, lower dependency rates and greater longevity are associated with higher domestic saving rates. However, these correlations are statistically robust only in Asia. In particular, Latin America, which is a region that has undergone a remarkably similar “saving friendly” demographic transition since the 1970s, did not experience the same boost in saving rates as Asia. The paper highlights that the potential dividends arising from a favorable demographic transition are not automatically accrued. This is a sobering message at a time when the demographic tide is shifting in the world.