Excerpt: While the empirical evidence tends to support some predictions of the life-cycle theory, a number of puzzles remain: an ageing-consumption, an ageing-saving and a saving-capitalisation puzzles have been put forward in the literature. This paper analyses the links between these three puzzles and develops a model relating usual life-cycle variables, social transfers (public health care expenditures and the generosity of pension systems) to the level of savings.

MORE >>