Population Aging, Intergenerational Transfers, and Saving in Thailand

Amonthep Chawla, University of Hawaii at Manoa

Changes in population age structure influence saving rates. The conventional lifecycle saving hypothesis indicates that the elderly heavily rely on dis-saving to support their consumption during retirement periods. If this model is correct, saving rates would be expected to decline as population ages. The empirical studies of this issue seem controversial. Some find that saving rates will substantially decline with population aging. Other argue that population aging could have only modest effects on a decline in saving rates. This paper sheds light on resolving this empirical controversy by including intergenerational transfers with lifecycle saving to explain the relationship between saving and age structure. The results, using Thailand as a case study, show that population aging will lead to a decline in saving rates. However, the magnitude of the decline in saving rate could be varied according to different economic growth rates and support systems, including public policy to the elderly.