THE LIFE-CYCLE MODEL OF INCOME, CONSUMPTION AND SAVING IN MEXICO

In recent years the analysis of relationships between changes in age structure and economic performance has attracted extensive attention. Children require intensive investment in health, nutrition and education, prime-age adults supply labor and savings and the elderly require expenditures on health care and retirement income. In this sense, an age structure concentrated at prime-age adults reduces the dependency ratio, and is seen as an advantage characterized as a demographic window. This research describes the life-cycle income, consumption and saving patterns of Mexican households. If the life-cycle hypothesis is correct, the age profile of income, consumption and saving should be relatively higher for the young than the old and we could accept the supposition of an optimistic link between demographic change and saving in the aggregate economy. We construct a pseudo-panel from the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH) between 1994 and 2008. Results show that the effects of age structure on consumption and saving rate are not coherent with the life-cycle hypothesis; there is no evidence of dissaving among the old age. Findings also show cohort and period effects.