The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. We revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, we are able to investigate the relationship for 11 developed countries over the period 1921-2002. We find no consistent relationship between lagged top income shares and current savings rates, and our standard errors are small enough that we are able to reject more than modest effects in either direction. We view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates. Copyright 2009 The Authors. Journal compilation 2009 International Association for Research in Income and Wealth Published by Blackwell Publishing.
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Paper
Andrew Leigh & Alberto Posso, 2008.
"Top Incomes and National Savings,"
CEPR Discussion Papers
588, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
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Dan Andrews & Christopher Jencks & Andrew Leigh, 2009.
"Do Rising Top Incomes Lift All Boats?,"
CAMA Working Papers
2009-17, Australian National University, Centre for Applied Macroeconomic Analysis.
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