THE SPIRIT OF CAPITALISM AND SAVINGS BEHAVIOR

This paper presents a capitalist-spirit model of savings by including wealth in the intertemporal utility function. While this model includes the life-cycle model and bequest model as two special cases; it sheds light on why wealth holding has tended to increase with age, why decumulation of wealth after retirement has not happened, and why households with and without children have not shown significant differences in their savings behavior. The capitalist-spirit approach is especially useful for understanding savings by the rich and savings across countries and over time (JEL E21, B10).