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Long-run Growth and Short-run Stabilization

Essays in Memory of Albert Ando

Edited by Lawrence R. Klein

There is much confusion in the economics literature on wage determination and the employment–inflation trade-off. Few model builders pay as much careful attention to the definition and meaning of long-run concepts as did Albert Ando. Expanding on years of painstaking work by Ando, the contributors elaborate on the main issues of economic analysis and policies that concerned him.
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Chapter 5: Do the Elderly Dissave in Japan?

Charles Yuji Horioka


* Charles Yuji Horioka INTRODUCTION Together with Franco Modigliani and Richard Brumberg, the late Albert Ando was one of the founding fathers of the life-cycle hypothesis of saving, which posits that people work and save when they are young and retire and dissave when they are old. It is not surprising, therefore, that Ando was very interested in whether the elderly dissave, as predicted by the life-cycle hypothesis. One of Ando’s most ingenious papers is Hayashi et al. (1988), in which he and his collaborators devise a very clever way of estimating the saving behavior of the elderly who live with their children. This chapter is organized as follows: in Section 2, I summarize Ando’s seminal work in this area; in Section 3, I present some pertinent data and evidence that became available only after Ando did his work in this area; Section 4 concludes. 2. PROFESSOR ANDO’S CONTRIBUTION Although it is easy to speak about the saving of the elderly in theoretical terms, it is notoriously difficult to measure it in actual practice, and as a result, no consensus has been reached about whether or not the elderly dissave. Just to enumerate some of the problems that arise when one wants to measure the saving of the elderly, one problem is that the unit of observation of the data that are available is almost always the household, and hence it is not possible to obtain direct data on the saving of the elderly individuals who live in multi-generation households....

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