IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Public policies and saving in developing countries

Listed author(s):
  • Corbo, Vittorio
  • Schmidt-Hebbel, Klaus

This paper draws on estimates of consumption functions for 13 developing countries to analyze the effectiveness of public policy in raising saving. First, it provides evidence from time-series and panel data on how liquidity constraints affect consumption functions. This suggests that a rise in public saving does not produce an equal reduction in private saving. Second, it presents direct evidence of thelink between private consumption and government saving. These show that indirect effects of public policies on private saving are negligible, but that cuts in current public spending and current tax hikes significantly affect private saving. Increasing public saving by cutting current-period public expenditures by $1 reduces private saving by only 16 to 50 cents. Permanent cuts in public spending reduce private saving by 47 to 50 cents. A higher permanent tax hike has less of an effect on private saving than a transitory tax hike. For each $1 increase in permanent taxes, private saving declines only 23 to 26 cents. Increasing only current-period taxes reduces private saving between 48 and 65 cents. Increasing taxes and improving tax compliance are the most efficient ways to reduce public deficits when traditional tax revenue is low and inefficient tax levies are high and widespread. Finally, public policy can help raise private saving and make their use more efficient by providing a macroeconomic framework in which inflation is low and incentives are predictable.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 36 (1991)
Issue (Month): 1 (July)
Pages: 89-115

in new window

Handle: RePEc:eee:deveco:v:36:y:1991:i:1:p:89-115
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:36:y:1991:i:1:p:89-115. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.