Discussion of Delay | Stagnationist Model | The Harrod-Domar Model | Coale-Hoover Model | Components of Demographic Growth |

Population Growth and Savings Rates

Population Growth and Savings Rates

Contents:

The Simple Relationship
The Effect of Income
Interaction with Youth Dependency Rate

The Simple Relationship

When data on population growth G(P), was plotted against data on the average propensity to save (APS), the scatter indicated that there wasd no relationship. This tended to disprove the assumption of a negative relationship made by Coale and Hoover.

The Effect of Income

The life cycle hypothesis implies that savings rates will rise as the economt grows because there will be a lag of several years between the time the income is earned and the time the income is spent since people are saving for their old age. Kelley found that a 1% increase in the growth rate of GDP G(Y) resulted in a .33 increase in the average propensity to save.

Interaction with Youth Dependency Rate

The youth dependency rare (D1) is the ratio of the population under 15 years of age to the population aged 15 to 64. The more rapid the growth rate of GDP, the more significant is the youth dependency rate (D1) because the burden of children prevents young people who have higher incomes from using those incomes to increase savings. By reducing their birth rates, the nations of East Asia reduced their youth dependency rates (D1). This contributed to their high rates of saving and investment.

Population Growth and Savings Rates
Contents: The Simple Relationship The Effect of Income Interaction with Youth Dependency Rate
The Simple Relationship When data on population growth G(P), was plotted against data on the average propensity to save (APS), the scatter indicated that there wasd no relationship. This tended to disprove the assumption of a negative relationship made by Coale and Hoover.

The Effect of Income The life cycle hypothesis implies that savings rates will rise as the economt grows because there will be a lag of several years between the time the income is earned and the time the income is spent since people are saving for their old age. Kelley found that a 1% increase in the growth rate of GDP G(Y) resulted in a .33 increase in the average propensity to save.

Interaction with Youth Dependency Rate The youth dependency rare (D1) is the ratio of the population under 15 years of age to the population aged 15 to 64. The more rapid the growth rate of GDP, the more significant is the youth dependency rate (D1) because the burden of children prevents young people who have higher incomes from using those incomes to increase savings. By reducing their birth rates, the nations of East Asia reduced their youth dependency rates (D1). This contributed to their high rates of saving and investment.