Household saving over the life cycle: international evidence from micro data

In this paper I estimate age-saving profiles from micro data in six countries (Italy, Japan, Tai-wan, Thailand, the UK, and the US) to verify whether households are saving as postulated by the life- cycle theory. The level of household savings depends on age, cohort and year effects, and the perfect collinearity among these effects is broken by applying a nonparametric regres-sion model. In this model, the cohort effect is assumed to be an arbitrary smooth function, and the model is estimated by the generalized additive model with a penalized smoothing spline approach. Estimated saving-age profiles showed declining savings in the old age for the ma-jority of examined countries. An interesting feature for Asian households was a double hump in savings, with a temporal dip for households for the age bracket at around mid-40s. JEL classification: D91; E2