Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/205669 
Year of Publication: 
2014
Series/Report no.: 
New Zealand Treasury Working Paper No. 14/14
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
The objective of the paper is to explore the saving and consumption responses of a representative household to a range of policy interventions such as changes in taxes and pension settings. To achieve this, it develops a two-period life-cycle model. The representative household maximises lifetime utility through its choice of optimal levels of consumption, housing and saving. A key feature of the approach is modelling the consumption of housing services as a separate good in retirement along with the implications for saving. Importantly, the model incorporates a government budget constraint involving a pay-as-you-go universal pension. In addition, the model allows for a compulsory private retirement savings scheme. Particular attention in the simulations is given to the potential impact on household saving rates of a range of policy changes. Typically the effect on saving rates is modest. In most instances, it would take very substantial changes in existing policy settings to induce significant increases in household saving rates.
Subjects: 
Savings
Housing
Retirement
Intertemporal elasticity of substitution
rate of interest
taxation
JEL: 
D12
H24
H31
J26
ISBN: 
978-0-478-42194-1
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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