Does Population Ageing Reduce Savings?

Mahmood Messkoub, Leeds University

The elderly are considered primarily as consumers (or dis-savers) and 'dependent' on the working population. This view lies at the heart of the current concern with the dependency of the elderly. The theoretical justification for this 'consumer' and 'dependent' view of ageing has been provided by the Life-Cycle theory of saving. The early discussions of dependency in LDCs were more concerned with the children's dependency than the elderly's on the working population. The policy message of this literature was control of poulation growth. With the ageing process well underway the dependency debate has come full circle and now focuses on the adverse impact of old age dependency on savings and investment - Malthusians win with high or low birth rate! This paper takes a fresh look at the relationship between population age structure and savings rate across a group of developed and developing countries, using World Development Indicators of the World Bank.