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Institutions and savings in developing and emerging economies

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  • Andreas Freytag

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  • Sebastian Voll

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Abstract

Domestic savings are an important prerequisite for capital formation and growth. In this paper we analyze a new channel through which institutions influence aggregate savings and economic development. Whereas research in the field of savings decisions concentrates largely on the level of the individual, the literature on institutions and growth as well as on aggregate savings formation focuses on the aggregate, national level. First, we develop a framework that brings together both lines of reasoning, arguing that institutions may influence the individual savings decision as well as national savings in aggregate. This potential for institutional quality to influence economic performance has been neglected so far. Second, we build upon the empirical literature on aggregate savings formation and provide results supporting our hypothesis that better economic institutions drive aggregate savings formation upwards. By contrast, we do not find such effects in the case of the political environment. Our findings are robust when checked against a number of changes in explanatory variables, estimation methods and the treatment of instruments. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Andreas Freytag & Sebastian Voll, 2013. "Institutions and savings in developing and emerging economies," Public Choice, Springer, vol. 157(3), pages 475-509, December.
  • Handle: RePEc:kap:pubcho:v:157:y:2013:i:3:p:475-509
    DOI: 10.1007/s11127-013-0121-7
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    File URL: http://hdl.handle.net/10.1007/s11127-013-0121-7
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    References listed on IDEAS

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    Cited by:

    1. repec:mes:emfitr:v:53:y:2017:i:11:p:2585-2608 is not listed on IDEAS
    2. Christian Bjørnskov, 2015. "Constitutional property rights protection and economic growth: evidence from the post-communist transition," Constitutional Political Economy, Springer, vol. 26(3), pages 247-280, September.
    3. Younas, Javed, 2015. "Terrorism, openness and the Feldstein–Horioka paradox," European Journal of Political Economy, Elsevier, vol. 38(C), pages 1-11.
    4. Merike Kukk & Karsten Staehr, 2015. "Macroeconomic factors in corporate and household saving. Evidence from Central and Eastern Europe," Bank of Estonia Working Papers wp2015-5, Bank of Estonia, revised 30 Dec 2015.

    More about this item

    Keywords

    Developing and emerging economies; Governance; Institutions; Savings; F32; O16; O43;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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