ABSTRACT
Author shows how individual life cycle saving could actually be increased by the introduction of social security or by an increase of social security benefits. The life cycle model is the central idea in the modern theory of saving because it provides the crucial link between the microeconomics of rational household behavior and the macroeconomics of the rate of saving. He summarizes some of the major findings of the econometric research. He focuses this necessarily brief summary on the studies dealing with the United States and on his own research. To assess the effect of international differences in social security benefits, he uses the data on this cross-section of countries to estimate a model of the saving and retirement behavior implied by the extended life cycle theory. The savings function in this model builds on earlier studies of international savings differences by Houthakker and Franco Modigliani.
