Dissaving

Dissaving

Dissaving is negative saving. If spending is greater than income, dissaving is taking place. This spending is financed by already accumulated savings, such as money in a savings account, or it can be borrowed.

Dissaving was reported as a typical response to deficits, for households with normal income and expenditure patterns during the depression of the 1930’s.[1]

The life cycle hypothesis of saving, of Ando and Modigliani[2] proposes that people work and save when they are young and retire and dissave when they become elderly.

Hayashi, Ando and Ferris[3] investigated whether the elderly save or dissave and found that for the United States that families after retirement dissave on average about a third of their peak wealth by the time of death, leaving the rest (mostly their homes) as bequests. In contrast they found that for Japan the elderly forming independent households and those living with children continue to save, for all but the most elderly. From age 80 or more and, also the single elderly of all ages, the dissaving patterns were evident.

Later evidence presented by Horioka[4] reinforces the life cycle hypothesis in Japan.

See also

References

  1. ^ Lawrence L. Vance, “The Interpretation of Consumer Dis-Saving”, The Journal of Marketing, Vol. 11, No. 3 (Jan., 1947), pp. 243-249.
  2. ^ Albert Ando and Franco Modigliani, “The "Life Cycle" Hypothesis of Saving: Aggregate Implications and Tests”, The American Economic Review, Vol. 53, No. 1, Part 1 (Mar., 1963), pp. 55-84
  3. ^ Fumio Hayashi, Albert Ando and Richard Ferris, “Life cycle and bequest savings A study of Japanese and U.S. households based on data from the 1984 NSFIE and the 1983 survey of consumer finances”, Journal of the Japanese and International Economies Volume 2, Issue 4, December 1988, Pages 450-491
  4. ^ Charles Yuji Horioka, “Do the elderly dissave in Japan?” Chapter 5 from “Long-run growth and short-run stabilization: essays in memory of Albert Ando”, edited by Lawrence Robert Klein, 2006

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