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Income inequality and aggregate saving : the cross-country evidence

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  • Schmidt-Hebbel, Klaus
  • Serven, Luis

Abstract

The authors empirically review and analyze the link between income distribution and aggregate savings. Recent research has focused on the impact of income inequality and growth. Less attention has been paid to the link between inequality and savings. Once the conventional representative-agent framework is abandoned, consumption theory brings out channels through which income inequality can affect aggregate saving. The authors present new econometric evidence on the link between saving and inequality using new data on income distribution for a large cross-country sample. The results provide no evidence that income inequality affects aggregate saving across countries. This conclusion holds for both industrial and developing countries and is open to changes in measures of saving, in income distribution indicators, and in functional forms.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1561.

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Date of creation: 31 Jan 1996
Date of revision:
Handle: RePEc:wbk:wbrwps:1561

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Related research

Keywords: Environmental Economics&Policies; Economic Theory&Research; Poverty Impact Evaluation; Banks&Banking Reform; Health Economics&Finance; Inequality; Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Governance Indicators;

References

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  1. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  2. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  3. Lim, David, 1980. "Income Distribution, Export Instability, and Savings Behavior," Economic Development and Cultural Change, University of Chicago Press, vol. 28(2), pages 359-64, January.
  4. Bourguignon, F. & Morrisson, C., 1990. "Income distribution, development and foreign trade : A cross-sectional analysis," European Economic Review, Elsevier, vol. 34(6), pages 1113-1132, September.
  5. Pischke, Jorn-Steffen, 1995. "Individual Income, Incomplete Information, and Aggregate Consumption," Econometrica, Econometric Society, vol. 63(4), pages 805-40, July.
  6. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  8. Christopher D. Carroll & David N. Weil, 1993. "Saving and Growth: A Reinterpretation," NBER Working Papers 4470, National Bureau of Economic Research, Inc.
  9. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-96, December.
  10. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
  11. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  12. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  13. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  14. Masao Ogaki & Jonathan David Ostry & Carmen Reinhart, 1995. "Saving Behavior in Low- and Middle -Income Developing Countries: A Comparison," IMF Working Papers 95/3, International Monetary Fund.
  15. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  16. Chris Carroll & Lawrence H. Summers, 1989. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Working Papers 3090, National Bureau of Economic Research, Inc.
  17. Maddison, A., 1991. "A Long Run Perspective on Saving," Papers 443, Groningen State, Institute of Economic Research-.
  18. Schmidt-Hebbel, Klaus & Webb, Steven B. & Corsetti, Giancarlo, 1991. "Household saving in developing countries : first cross-country evidence," Policy Research Working Paper Series 575, The World Bank.
  19. Anand, Sudhir & Kanbur, S. M. R., 1993. "The Kuznets process and the inequality--development relationship," Journal of Development Economics, Elsevier, vol. 40(1), pages 25-52, February.
  20. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  21. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
  22. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  23. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  24. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  25. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  26. Schmidt-Hebbel, Klaus & Serven, Luis & Solimano, Andres, 1996. "Saving and Investment: Paradigms, Puzzles, Policies," World Bank Research Observer, World Bank Group, vol. 11(1), pages 87-117, February.
  27. Gupta, K L, 1970. "Personal Saving in Developing Nations: Further Evidence," The Economic Record, The Economic Society of Australia, vol. 46(114), pages 243-49, June.
  28. Adelman, Irma & Robinson, Sherman, 1989. "Income distribution and development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 19, pages 949-1003 Elsevier.
  29. repec:fth:coluec:757 is not listed on IDEAS
  30. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, vol. 73(4), pages 672-90, September.
  31. Blinder, Alan S, 1975. "Distribution Effects and the Aggregate Consumption Function," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 447-75, June.
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Citations

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Cited by:
  1. Jason Furman & Joseph E. Stiglitz, 1998. "Economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 221-263.
  2. Siebert, Horst, 1998. "Consequences of rising income inequality: a comment," Kiel Working Papers 875, Kiel Institute for the World Economy.
  3. Dominique Hachette, 1998. "Ahorro Privado en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 35(104), pages 3-48.
  4. Horst Siebert, 1998. "Commentary : economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 265-281.
  5. Joel Slemrod, 1998. "The Economics of Taxing the Rich," NBER Working Papers 6584, National Bureau of Economic Research, Inc.

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