Life-Cycle Saving Behavior in Mexico

Isalia Nava-Bolaños, El Colegio de México

Previous research has emphasized in the effect of the population change in the economic development, particularly the importance of saving to rapid economic growth. The changes in age structure will have compositional effects if saving rates vary by life-cycle. This document describes the life-cycle saving patterns of Mexican households by decomposing age, cohort and period effects. Since, the life cycle is a longitudinal concept I construct pseudo-panels data from the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH) between 1994 and 2008. Results show that there is no evidence of dissaving among the old households; indeed, the saving rate increases with age at least up to age 79. It is possible that age selectivity is responsible for this finding. Other result is the statistical significance of the cohort effects.