The Savings Rate Debate: Does the Dependency Hypothesis Hold for Australia and Canada?

Author: Wilson, Stuart J.

Source: Australian Economic History Review, Volume 40, Number 2, July 2000 , pp. 199-218(20)

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Abstract:

Australia and Canada have both experienced a long-run increase in aggregate savings rates over the past century from below 10 per cent to rates exceeding 20 per cent. Two recent studies have concluded that demographic change played the predominant role in driving this long-run trend for both nations, one of which implies that a declining child dependency burden caused savings rates to increase over time. New results obtained by using a cointegration approach show that savings rates were driven by increases in real income in the long run. In the short run, increases in the working-age population in Canada increased the savings rate. In Australia, baby booms and busts occurred simultaneously with savings booms and busts. Contrary to recent work, there is no significant evidence to support a child dependency burden on savings for Australia or Canada over the last century.

Document Type: Original article

DOI: http://dx.doi.org/10.1111/1467-8446.00065

Affiliations: 1: Queen's University, Ontario, and the University of Regina, Saskatchewan

Publication date: 2000-07-01