Precautionary Saving and Old-Age Pensions

A precautionary saving model is extended to include old-age pensions and provides the framework for an empirical analysis of the relation between old-age pensions and private consumption. Norwegian macro-data for socioeconomic groups of households are used to estimate consumption functions for workers and pensioners. We find no effects from various approximations of expected pension-income to consumption for workers, but results indicate some influence from labour-income uncertainty. Income elasticities are found to differ considerably between the two groups of households. Implications for effects on aggregate saving from pension policies and of ageing populations are discussed.