The Saving Ration in a Computer Simulation of the Life Cycle Model

Abstract: In her influential study with respect to the life cycle hypothesis, White (1978) applies computer simulation for an empirical analysis. She concludes that the pure life cycle model without bequests can account for, at best, 42 percent of observed personal saving. In the present paper, Harrod-neutral technological change is introduced to a comparable computer model. In contrast to White (1978) numerical computation of the steady state then reveals a plausible saving ratio. A second result reveals that the steady state values in a model of this class are extremely sensitive to parametrization. Unfortunately the exogenously given parameters have no sufficient empirical backing. This casts serious doubts on general refutations of thepure life cycle model based on computer simulations of the kind used by White (1978).;