The tendency of both young and old households to save, or to dissave a very small fraction of their total resources, is inconsistent with a strict life cycle model. We concentrate on young households and document their behaviour, drawing on Italian and Japanese data. We also propose a theoretical structure that is broadly consistent with the spirit of the life cycle theory while at the same time capable of accounting for the observed facts without relying on assumptions concerning the working of credit markets or the degree of foresight of consumers.
This paper - presented at the Workshop on "Savings in Italy: Past and Future Trends, Household and Government Behaviour", held in Rome on 16-17 January 1992 - is part of a research project undertaken at the Bank of Italy. The Italian versions of all the contributions will be published in a special issue of "Contributi all'analisi economica".
