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Why aren't developed countries saving?

Author

Listed:
  • Dobrescu, Loretti I.
  • Kotlikoff, Laurence J.
  • Motta, Alberto

Abstract

National saving rates differ enormously across developed countries. But these differences obscure a common trend, namely a dramatic decline over time. France and Italy, for example, saved over 23% and 19% of national income in 1970, but only 9% and 4% respectively in 2008. Japan saved almost 33% in 1970, but only 7% in 2008. And the U.S. saved around 11% in 1970, but only 1% in 2008. What explains these international and intertemporal differences? Is it demographics, government spending, productivity growth or preferences?

Suggested Citation

  • Dobrescu, Loretti I. & Kotlikoff, Laurence J. & Motta, Alberto, 2012. "Why aren't developed countries saving?," European Economic Review, Elsevier, vol. 56(6), pages 1261-1275.
  • Handle: RePEc:eee:eecrev:v:56:y:2012:i:6:p:1261-1275
    DOI: 10.1016/j.euroecorev.2012.04.003
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    References listed on IDEAS

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    1. Jerry Green & Laurence J. Kotlikoff, 2006. "On the General Relativity of Fiscal Language," NBER Working Papers 12344, National Bureau of Economic Research, Inc.
    2. Hans Fehr & Sabine Jokisch & Laurence J Kotlikoff, 2006. "Will China Eat Our Lunch or Take Us to Dinner? Simulating the Transition Paths of the US, EU, Japan and China," RBA Annual Conference Volume,in: Christopher Kent & Anna Park & Daniel Rees (ed.), Demography and Financial Markets Reserve Bank of Australia.
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    6. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
    7. Kotlikoff, Laurence J & Razin, Assaf & Rosenthal, Robert W, 1990. "A Strategic Altruism Model in Which Ricardian Equivalence Does Not Hold," Economic Journal, Royal Economic Society, vol. 100(403), pages 1261-1268, December.
    8. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    9. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-1166, December.
    10. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    11. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.
    12. Gramlich, Edward M, 1989. "Budget Deficits and National Saving: Are Politicians Exogenous?," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 23-35, Spring.
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    17. Enrique G. Mendoza & Vincenzo Quadrini & José-Víctor Ríos-Rull, 2009. "Financial Integration, Financial Development, and Global Imbalances," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 371-416, June.
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    Cited by:

    1. Carbone, Enrica & Duffy, John, 2014. "Lifecycle consumption plans, social learning and external habits: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 413-427.
    2. János Vincze & Gergely Varga, 2015. "Ants and crickets: arbitrary saving rates in an agent-based model with infinitely lived-agents," IEHAS Discussion Papers 1504, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    3. Bucciol, Alessandro & Veronesi, Marcella, 2014. "Teaching children to save: What is the best strategy for lifetime savings?," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 1-17.

    More about this item

    Keywords

    National saving; Discount factor; Simulated method of moments;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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