Life, Death, and Taxes: The Evolution of Household Saving in Sweden

Abstract: Sweden, from the late 1990s to the present day, has seen a pronounced and prolonged increase in its household saving rate. This change seems opposite to what most common theoretical saving models would predict. Our study aims to investigate what caused Sweden's diversion from its past and expected saving behaviour. To solve the Swedish household saving conundrum we investigate Nordic economic data empirically using OLS and GLS econometric models. We proceed into modeling the Swedish economy with a recursive stochastic life cycle model. The results indicate that income, wealth, and bequest tax levels alongside age-demographic changes can partially explain Sweden's increase in household saving.