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Economic Change and Restructuring

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01-04-2024

The moderating role of financial development in the nexus between population aging and saving

Authors: Dong-Hyeon Kim, Peiyao Liu, Shu-Chin Lin

Published in: Economic Change and Restructuring | Issue 2/2024

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Abstract

The paper empirically investigates the saving consequence of population aging, an issue that is important for policymaking and still far from uncontroversial. Rather than providing another piece of evidence to verify the positive or negative correlation between population aging and saving, the contribution of the paper is to consider the moderating role of financial development in the nexus. In a cross-country panel data setting, we find that population aging proxied by old-age dependency decreases saving, but the effect diminishes with financial development. The opposite is found for life expectancy. Financial development weakens the saving-increasing effect of life expectancy. The findings hold for different types of saving and controlling for per-capita income growth. The data suggest that life expectancy may offset the effect of old-age dependency, limiting the influence of population aging on saving. The evidence also suggests that financial development constrains the saving effect of population aging and the need to consider a country’s extent of financial development to address the saving consequence as a population ages.

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Title: The moderating role of financial development in the nexus between population aging and saving
Authors: Dong-Hyeon Kim
Peiyao Liu
Shu-Chin Lin
Publication date: 01-04-2024
Publisher: Springer US
Published in: Economic Change and Restructuring / Issue 2/2024
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-024-09670-5

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