The Japanese Saving Rate between 1960-2000: Productivity, Policy Changes, and Demographics

In this paper, we use an overlapping generations model to study the factors generating the saving rate in Japan between 1960-2000. The model economy allows for observed aging of the population, total factor productivity, and fiscal policy to affect the national saving rate. Our calibrated general equilibrium setup is able to generate saving rates that are reasonably similar to the data during this period. We conduct counterfactual experiments to isolate the quantitative impact of the changes in demographics, social security benefits, and total factor productivity growth on saving behavior. Our results indicate that changes in the TFP growth rate are the main reason for the observed saving rates in Japan. ∗Department of Economics, University of Oslo. Box 1095, Blindern, N-0317 Oslo, Norway ‡Department of Finance and Business Economics, Marshall School of Business, University of Southern California, Los Angeles, CA 90089-1427. Corresponding author: [email protected]