Are we living beyond our means? A comparison of France, Italy, Spain and the United Kingdom

Pub. Date
09 April, 2008
Pub. Type

This paper explores the savings needs of France, Italy, Spain and the United Kingdom on the assumption that each cohort is self-sufficient. Cross section profiles for labour income and consumption (taking public and private consumption together) are used. They are adjusted for trend growth with the consumption profile being scaled so that the life time budget constraint for the youngest cohort is met. Rent from land is found to be important to the calculations. The income and consumption profiles are used to calculate the required wealth holding of each older cohort. Savings and wealth holding figures are calculated by age and population data are used to aggregate them for the whole population. Savings rates are found to be lower than those required and holdings of produced wealth are inadequate to pay for current consumption patterns by the current adult population in all four countries. The United Kingdom faces particularly acute problems. The impact of rising survival rates and of longer working life is also explored.