W hen you walk into a store, you are confronted with thousands of goods that
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- 454 PART VII
- 21-4c How Do Interest Rates Affect Household Saving
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study “No more 9 to 5 for me.” Mirrorpix/ a lamy 65875_ch21_ptg01_433-460.indd 453 15/10/13 11:53 AM Copyright 201 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 454 PART VII tOpICS FOr FUrther StUDY Similar results were found in a 1993 study, published in the Quarterly Journal of Economics, of how receiving a bequest affects a person’s labor supply. The study found that a single person who inherits more than $150,000 is four times as likely to stop working as a single person who inherits less than $25,000. This find- ing would not have surprised the 19th-century industrialist Andrew Carnegie. Carnegie warned that “the parent who leaves his son enormous wealth gener- ally deadens the talents and energies of the son, and tempts him to lead a less useful and less worthy life than he otherwise would.” That is, Carnegie viewed the income effect on labor supply to be substantial and, from his paternalistic per- spective, regrettable. During his life and at his death, Carnegie gave much of his vast fortune to charity. 21-4c How Do Interest Rates Affect Household Saving? An important decision that every person faces is how much income to consume today and how much to save for the future. We can use the theory of consumer choice to analyze how people make this decision and how the amount they save depends on the interest rate their savings will earn. Consider the decision facing Saul, a worker planning for retirement. To keep things simple, let’s divide Saul’s life into two periods. In the first period, Saul is young and working. In the second period, he is old and retired. When young, Saul earns $100,000. He divides this income between current consumption and saving. When he is old, Saul will consume what he has saved, including the inter- est that his savings have earned. Suppose the interest rate is 10 percent. Then for every dollar that Saul saves when young, he can consume $1.10 when old. We can view “consumption when young” and “consumption when old” as the two goods that Saul must choose between. The interest rate determines the relative price of these two goods. Figure 15 shows Saul’s budget constraint. If he saves nothing, he con- sumes $100,000 when young and nothing when old. If he saves everything, he tải về 1.28 Mb. Chia sẻ với bạn bè của bạn:
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