Projected long-term demographic trends and aggregate personal saving in the United States

The potential effect of the changing age distribution of the U.S. population on the level of aggregate saving is examined. "The Modigliani-Brumberg life-cycle model predicts a relationship between age distribution and the aggregate saving ratio via the population growth rate, which affects the ratio of earner/savers to retiree-dissavers. Aging resulting from slower population growth will result in a decline in the aggregate saving rate. This paper utilizes empirical age-saving relations, together with projected long-run population age distributions, to estimate the age distribution effect on aggregate personal saving. Results predict a much smaller decline in the saving ratio than is generated by the basic life-cycle model."