Lots of empirical studies have concluded that basic life-cycle hypothesis is not convincing and tried to add the supplementary explanation by employing "precautionary motive" and "bequest motive". However, these two motives unable to make sufficient responses until now. Japan, in the position of confronting a super-ageing society, holds the puzzle that elderly people do not have these two motives, since the medical insurance system and the long-term care insurance system have already been enhanced (which falls under precautionary motive), and the number of single households and unmarried people among elderly has dramatically increased (which belongs to "bequest motive").
Using the household savings survey 2013-18 (carried out by Yucho foundation in Japan), this study demonstrates the puzzle employing the prospect theory in the context of both risk and uncertainty. Specifically, I examined a single decision based on three unordered alternatives by multinomial logit model (MNL). The results showed that present bias make people save more, and risk averse drive them more cautious when it comes to exhausting decision. We suggest that not only the institutional factors, but also the psychological issues are important for social welfare policy for elderly.
Yuko Nozaki, Sugiyama Jyogakuen University, Japan