IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v40y1996i2p255-288.html
   My bibliography  Save this article

Saving and growth: Evidence from micro data

Author

Listed:
  • Paxson, Christina

Abstract

This paper examines whether the observed cross-country correlation between aggregate saving rates and economic growth can be explained by models in which higher growth increases saving rates, rather than the other way around. The paper focusses on two explanations of why growth might increase saving. First, standard life-cycle theory implies that higher growth will increase the life- time wealth of younger savers relative to older dissavers, thereby increasing the aggregate saving rate. Second, models of consumption with habit formation imply that consumption responds slowly to unexpected income growth, and so unanticipated growth can produce a higher saving rate at least in the short run. I assess the validity of these explanations using time-series of cross-sections of household income and consumption surveys from four countries: the US, Britain, Taiwan and Thailand. I find that although in three out of the four countries there is evidence that saving behavior is consistent with life-cycle theory, there is simply too little life-cycle saving for higher growth to have a large effect on the aggregate saving rate. The habit formation model also implies very small effects of growth on saving rates. A large portion of the observed cross-country correlation between saving and growth cannot be explained by these models.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Paxson, Christina, 1996. "Saving and growth: Evidence from micro data," European Economic Review, Elsevier, vol. 40(2), pages 255-288, February.
  • Handle: RePEc:eee:eecrev:v:40:y:1996:i:2:p:255-288
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0014-2921(95)00063-1
    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 below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barry Bosworth & Gary Burtless & John Sabelhaus, 1991. "The Decline in Saving: Evidence from Household Surveys," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 183-256.
    2. James M. Poterba, 1994. "Public Policies and Household Savings," NBER Books, National Bureau of Economic Research, Inc, number pote94-2, August.
    3. 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.
    4. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-1262, December.
    5. James Banks & Richard Blundell, 1993. "Household saving behaviour in the UK," IFS Working Papers W93/05, Institute for Fiscal Studies.
    6. Martin Feldstein & Philippe Bacchetta, 1991. "National Saving and International Investment," NBER Chapters,in: National Saving and Economic Performance, pages 201-226 National Bureau of Economic Research, Inc.
    7. Angus S. Deaton & Christina Paxson, 1994. "Saving, Growth, and Aging in Taiwan," NBER Chapters,in: Studies in the Economics of Aging, pages 331-362 National Bureau of Economic Research, Inc.
    8. James M. Poterba, 1994. "Introduction to "International Comparisons of Household Saving"," NBER Chapters,in: International Comparisons of Household Saving, pages 1-10 National Bureau of Economic Research, Inc.
    9. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-196.
    10. Poterba, James M. (ed.), 1994. "Public Policies and Household Saving," National Bureau of Economic Research Books, University of Chicago Press, number 9780226676180, October.
    11. James Banks & Richard Blundell, 1994. "Taxation and Personal Saving Incentives in the United Kingdom," NBER Chapters,in: Public Policies and Household Savings, pages 57-80 National Bureau of Economic Research, Inc.
    12. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    13. Christopher D. Carroll & Lawrence H. Summers, 1991. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Chapters,in: National Saving and Economic Performance, pages 305-348 National Bureau of Economic Research, Inc.
    14. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:40:y:1996:i:2:p:255-288. 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). General contact details of provider: http://www.elsevier.com/locate/eer .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.