IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Does income inequality raise aggregate saving?

Author Info

Listed author(s):
  • Schmidt-Hebbel, Klaus
  • Serven, Luis

Abstract

This paper reviews analytically and empirically the links between income distribution and aggregate saving. Consumption theory brings out a number of direct channels through which income inequality can affect overall household saving -- positively in most cases. However, recent political-economy theory points toward indirect, negative effects of inequality -- through investment, growth, and public saving -- on aggregate saving. On theoretical grounds the sign of the saving-inequality link is therefore ambiguous. This paper presents new empirical evidence on the relationship between income distribution and aggregate saving, based on a new and improved income distribution database for both industrial and developing countries. The empirical results, using alternative inequality and saving measures and various econometric specifications on both cross-section and panel data, provide no support for the notion that income inequality has any systematic effect on aggregate saving. These findings are consistent with the theoretical ambiguity but contrast with previous empirical literature that found a positive cross-country association between income inequality and aggregate saving.

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

Download Info

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: http://www.sciencedirect.com/science/article/pii/S0304-3878(00)00063-8
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): 61 (2000)
Issue (Month): 2 (April)
Pages: 417-446

as
in new window

Handle: RePEc:eee:deveco:v:61:y:2000:i:2:p:417-446
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Christopher D Carroll, 1997. "Why Do the Rich Save So Much?," Economics Working Paper Archive 388, The Johns Hopkins University,Department of Economics.
  2. Rudiger Dornbusch & Sebastian Edwards, 1991. "The Macroeconomics of Populism in Latin America," NBER Books, National Bureau of Economic Research, Inc, number dorn91-1, June.
  3. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  4. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
  5. Gersovitz, Mark, 1988. "Saving and development," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 10, pages 381-424 Elsevier.
  6. Lim, David, 1980. "Income Distribution, Export Instability, and Savings Behavior," Economic Development and Cultural Change, University of Chicago Press, vol. 28(2), pages 359-364, January.
  7. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
  8. Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June.
  9. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
  10. Susan M. Collins, 1991. "Saving Behavior in Ten Developing Countries," NBER Chapters,in: National Saving and Economic Performance, pages 349-376 National Bureau of Economic Research, Inc.
  11. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  12. Carroll, Christopher D & Kimball, Miles S, 1996. "On the Concavity of the Consumption Function," Econometrica, Econometric Society, vol. 64(4), pages 981-992, July.
  13. Rudiger Dornbusch & Sebastian Edwards, 1991. "The Macroeconomics of Populism," NBER Chapters,in: The Macroeconomics of Populism in Latin America, pages 7-13 National Bureau of Economic Research, Inc.
  14. Venieris, Yiannis P & Gupta, Dipak K, 1986. "Income Distribution and Sociopolitical Instability as Determinants of Savings: A Cross-sectional Model," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 873-883, August.
  15. Musgrave, Philip, 1980. "Income Distribution and the Aggregate Consumption Function," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 504-525, June.
  16. 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.
  17. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, vol. 73(4), pages 672-690, September.
  18. Jeffrey G. Williamson, 1968. "Personal Saving in Developing Nations: An Intertemporal Cross‐Section from Asia," The Economic Record, The Economic Society of Australia, vol. 44(2), pages 194-210, 06.
  19. Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 38-71, March.
  20. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  21. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-196.
  22. Schmidt-Hebbel, Klaus & Webb, Steven B & Corsetti, Giancarlo, 1992. "Household Saving in Developing Countries: First Cross-Country Evidence," World Bank Economic Review, World Bank Group, vol. 6(3), pages 529-547, September.
  23. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
  24. Gupta, K L, 1970. "Personal Saving in Developing Nations: Further Evidence," The Economic Record, The Economic Society of Australia, vol. 46(114), pages 243-249, June.
  25. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-732, August.
  26. Laurence J. Kotlikoff & Lawrence H. Summers, 1986. "The Contribution of Intergenerational Transfers to Total Wealth: A Reply," NBER Working Papers 1827, National Bureau of Economic Research, Inc.
  27. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  28. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-896, December.
  29. 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.
  30. Blinder, Alan S, 1975. "Distribution Effects and the Aggregate Consumption Function," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 447-475, June.
  31. Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1995. "Saving behavior in low- and middle-income developing countries," MPRA Paper 13757, University Library of Munich, Germany.
  32. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
  33. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
  34. Della Valle, Philip A & Oguchi, Noriyoshi, 1976. "Distribution, the Aggregate Consumption Function, and the Level of Economic Development: Some Cross-Country Results," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1325-1334, December.
  35. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
  36. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

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

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:61:y:2000:i:2:p:417-446. 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.