An Analysis on the Effect of Old Age Dependency Ratio on Domestic Saving Rate

As continuously studied by numerous papers, demographic factors are expected to be crucial components that affect the saving rates of countries. This paper investigates the correlation between the domestic saving rates and the old age dependency ratio, by examining the data set of 15 high income countries from 1975 to 2010, based on hypothesis that old age dependency ratio is negatively correlated with the domestic saving rate. Other four explanatory variables, young age dependency ratio, short-term interest rate, unemployment rate, and GNI per capita, are also used as regressors in econometric models. The results of this paper, however, illustrate that the OADR has no significant effect on the domestic saving rates, while GNI per capita is found to be a sole factor that is statistically significantly correlated, consistently throughout the regression results.