Investigating the Effect of Longevity on Saving in Iran

Authors

1 tarbiat modares university

2 isfahan university

Abstract

 
Earlier empirical studies found that age dependency rates have a negative effect on saving, but they have not considered longevity as a factor. The rising longevity and aging of the population in recent decades is an important factor that this research takes into account and estimates Iran's saving function in the period of 1968-2010. In this study a saving function is designed for Iran and CUSUM and CUSUMSQ tests show the stability of the saving function. Then the ARDL approach to Cointegration is applied to analyze the long-run relationships among variables and coefficients for the long-run and the error correction models have been estimated. We found that old-age dependency rate reduces the saving rate in the short-run and the long-run while longevity has a significantly positive effect on the saving rate in the short-run and the long-run, However, this effect is greater in long-run rather than short-run. The absolute value of the old-age dependency rate effect is greater than the longevity effect both in the long-run and the short-run. The result of this study shows the individual's positive response to rising life expectancy. Indeed, higher life expectancy indicates the promotion of elderly health status. It affects their saving behavior, makes them more provident and save more.

Keywords

References

 
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Iranian Economic Development Analyses
Volume 1, Issue 1 - Serial Number 1
January 2013
Pages 119-144

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