Abstract
The selfish life-cycle model or hypothesis is, together with the dynasty or altruism model, the most widely used theoretical model of household behavior in economics, but does this model apply in the case of a country like Japan, which is said to have closer family ties than other countries? In this paper, we first provide a brief exposition of the simplest version of the selfish life-cycle model and then survey the literature on household saving and bequest behavior in Japan in order to answer this question. The paper finds that almost all of the available evidence suggests that the selfish life-cycle model applies to at least some extent in all countries but that there is more consistent support for this model in Japan than in the United States and other countries. It then explores possible explanations for why the life-cycle model is more consistently supported in Japan than in other countries, attributing this finding to government policies, institutional factors, economic factors, demographic factors, and cultural factors. Finally, it shows that the findings of the paper have many important implications for economic modeling and for government tax and expenditure policies.
Highlights
The selfish life-cycle model or hypothesis is, together with the dynasty or altruism model of Barro (1974) that assumes the presence of intergenerational altruism, the most widely used theoretical model of household behavior in economics
The purpose of this paper is to provide a brief exposition of the simplest version of the selfish life-cycle model and to survey the literature on household saving and bequest behavior in Japan to shed light on whether or not the selfish life-cycle model applies in the case of Japan
We should note that the selfish life-cycle model is not the only theoretical model that predicts that the age structure of the population will have a significant impact on the household saving rate and that, we can conclude that the evidence is consistent with the selfish life-cycle model, we cannot assert that we have unequivocably established that the selfish life-cycle model applies in the case of Japan
Summary
The selfish life-cycle model or hypothesis is, together with the dynasty or altruism model of Barro (1974) that assumes the presence of intergenerational altruism, the most widely used theoretical model of household behavior in economics.
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