IDEAS home Printed from
   My bibliography  Save this book

What Determines Savings?


  • Laurence J. Kotlikoff

    () (Boston University)


What determines savings? The question is timely and important. The U.S. saving rate is less than half that of Japan, Germany, and other developed countries, and the imbalance in saving rates across countries is responsible, in large part for the imbalance in international trade. This book examines a number of important determinants of wealth accumulation, including retirement bequests, and precautionary saving motives, demographics, the tax structure, social security, and insurance institutions. Using a blend of theory, empirical research and simulation methods, it reaches some surprising conclusions about what determines savings. Kotlikoff notes that most of U.S. wealth is due not to life cycle saving for retirement but rather to bequests and other intergenerational transfers. The process of passing wealth from one generation to the next may be explained, in large part, because of imperfect annuity arrangements. In addition to life span uncertainty, the author points out other types of uncertainty such as uncertainty about future medical expenditures can greatly stimulate saving. Fiscal policies, such as unfunded social security, can dramatically alter a country's wealth, although the process can take many years. Unfortunately, Kotlikoff observes, official fiscal deficits are intrinsically unreliable for measuring the government's stance of fiscal policy. He also concludes that the baby busts currently underway in the United States, Europe, and Japan are likely to improve overall economic welfare despite their detrimental impacts on social security systems

Suggested Citation

  • Laurence J. Kotlikoff, 1989. "What Determines Savings?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611872, January.
  • Handle: RePEc:mtp:titles:0262611872

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Van Wijnbergen, Sweden, 1986. "On fiscal deficits, the real exchange rate and the world rate of interest," European Economic Review, Elsevier, vol. 30(5), pages 1013-1023, October.
    2. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    3. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    4. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
    5. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," Review of Economic Studies, Oxford University Press, vol. 32(2), pages 137-150.
    6. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    7. Uzawa, H, 1969. "Time Preference and the Penrose Effect in a Two-Class Model of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 77(4), pages 628-652, Part II, .
    8. van Wijnbergen, Sweder, 1987. "Tariffs, Employment and the Current Account: Real Wage Resistance and the Macroeconomics of Protectionism," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 691-706, October.
    Full references (including those not matched with items on IDEAS)

    More about this item


    U.S. savings; wealth accumulation;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries


    Access and download statistics


    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:mtp:titles:0262611872. 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: (Kristin Waites). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.