On the demand side, older people tend to
dissave, putting upward pressure on the interest rate; while younger people, expecting to live longer, save more, putting downward pressure on interest rates.
Finally, when households enter the retirement phase, they
dissave, dipping into their accumulated wealth to fund consumption.
As many people who have looked at the data have pointed out, it turns out that a lot of retired people actually save rather than
dissave. Most people do not follow the lifecycle hypothesis, and we have to allow for intergenerational transfers (which might reduce inequality).
Results revealed a significant main effect of year on saving by adjusting expenditure F(4,460) = 6.43; p < .001; [[eta].sup.2.sub.p] = .053, working outside home F(4,460) = 4.89; p<.01; [[eta].sup.2.sub.p] = .041, and selling F(4,460) = 4.54; p <.01; [[eta].sup.2.sub.p] = .038, and no effect of year on negotiate, borrow,
dissave F(4,460)= 1.55; p > .05.
found that not only did older Americans not
dissave to finance their consumption during retirement, but they also spent less on consumer goods and services than did nonelderly people at all levels of income.
During youth and retirement age, individuals will
dissave, and saving will occur while an individual is productive in his middle age.
One reason was that rising stock markets and higher house prices made individuals wealthier, reducing their need to save for retirement and allowing retirees to
dissave more.
The long-term decline in savings in advanced countries can be explained by the following factors (IMF, 2005): increased access to credit facilitated by financial market innovation; the decline in public savings in some advanced economies such as the US; and an increase in the elderly dependency ratio, where an aging population tends to
dissave during retirement.
The consequence for the personal savings rate would of course be disastrous, for as people aged, they would have every incentive to
dissave so as to leave nothing to the taxman on their death, since they would be prevented from leaving anything to their descendants.
According to Modigliani's [1970] life-cycle theory, economic agents tend to engage in active saving while they are working and to begin to
dissave (or a negative saving) when they retire (around age 65 or greater).
Consequently, in order to maintain a smooth consumption path, economic agents may be forced to
dissave by a larger amount than they would otherwise have.