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The Savings Rate Debate: Does the Dependency Hypothesis Hold for Australia and Canada?
Author(s) -
Wilson Stuart J.
Publication year - 2000
Publication title -
australian economic history review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.493
H-Index - 16
eISSN - 1467-8446
pISSN - 0004-8992
DOI - 10.1111/1467-8446.00065
Subject(s) - dependency ratio , boom , baby boom , cointegration , economics , short run , population , demographic economics , work (physics) , development economics , monetary economics , econometrics , demography , environmental science , engineering , mechanical engineering , environmental engineering , sociology
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.