Why are saving rates in East Asia so high? Reviving the life cycle hypothesis

Abstract

Why are saving rates in the East Asian countries so high? This paper represents an attempt to provide an explanation in terms of rapid income growth rates linked to the life cycle hypothesis under the modification that consumption standards rise as income does, and that they continue to rise well beyond the consumer's retirement age. Empirical tests support the relationship between saving rates and growth implied by the theory. This approach goes a long way toward explaining high saving rates in East Asia. Copyright Springer-Verlag Berlin Heidelberg 2003Key words: Life Cycles, Saving, Growth, Relative Income., JEL classification: G11,

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