IDEAS home Printed from
   My bibliography  Save this paper

Top Incomes and National Savings


  • Andrew Leigh
  • Alberto Posso


The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. We revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, we are able to investigate the relationship for eleven developed countries over the period 1921-2002. We find no consistent relationship between lagged top income shares and current savings rates, and our standard errors are small enough that we are able to reject more than modest effects in either direction. We view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.

Suggested Citation

  • Andrew Leigh & Alberto Posso, 2008. "Top Incomes and National Savings," CEPR Discussion Papers 588, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:588

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    2. Anthony B. Atkinson & Andrew Leigh, 2007. "The Distribution of Top Incomes in Australia," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 247-261, September.
    3. Taylor, Alan M., 2002. "A century of current account dynamics," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 725-748, November.
    4. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    5. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, June.
    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    7. Axel Dreher & Noel Gaston, 2008. "Has Globalization Increased Inequality?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 516-536, August.
    8. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    9. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
    10. David Bunting, 1991. "Savings and the Distribution of Income," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 14(1), pages 3-22, September.
    11. Andrew Leigh, 2007. "How Closely Do Top Income Shares Track Other Measures of Inequality?," Economic Journal, Royal Economic Society, vol. 117(524), pages 619-633, November.
    12. Seiritsu Ogura & Toshiaki Tachibanaki & David A. Wise, 2001. "Aging Issues in the United States and Japan," NBER Books, National Bureau of Economic Research, Inc, number ogur01-1, January.
    13. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    14. Tim Callen & Christian Thimann, 1997. "Empirical Determinants of Household Saving; Evidence From OECD Countries," IMF Working Papers 97/181, International Monetary Fund.
    15. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    16. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, vol. 95(3), pages 831-849, June.
    17. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
    18. 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.
    19. Schmidt-Hebbel, Klaus & Serven, Luis, 2000. "Does income inequality raise aggregate saving?," Journal of Development Economics, Elsevier, vol. 61(2), pages 417-446, April.
    20. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    21. Alvaredo, Facundo & Saez, Emmanuel, 2006. "Income and Wealth Concentration in Spain in a Historical and Fiscal Perspective," CEPR Discussion Papers 5836, C.E.P.R. Discussion Papers.
    22. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
    23. repec:dau:papers:123456789/10091 is not listed on IDEAS
    24. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    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.

    Cited by:

    1. Alvarez-Cuadrado, Francisco & El-Attar, Mayssun, 2012. "Income Inequality and Saving," IZA Discussion Papers 7083, Institute for the Study of Labor (IZA).
    2. Christian A. Belabed & Thomas Theobald & Till van Treeck, 2013. "Income Distribution and Current Account Imbalances," IMK Working Paper 126-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    4. Rémi Bazillier & Jérôme Hericourt, 2017. "The Circular Relationship Between Inequality, Leverage, And Financial Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 463-496, April.
    5. Andrews Dan & Jencks Christopher & Leigh Andrew, 2011. "Do Rising Top Incomes Lift All Boats?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-45, January.
    6. Jan Behringer & Till van Treeck, 2013. "Income distribution and current account: A sectoral perspective," IMK Working Paper 125-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Tuomas, Malinen, 2011. "Inequality and savings: a reassesment of the relationship in cointegrated panels," MPRA Paper 33350, University Library of Munich, Germany.
    8. Santo Milasi, 2014. "Top Income Shares and Budget Deficits," Rivista di Politica Economica, SIPI Spa, issue 1, pages 383-406, January-M.
    9. Busl, Claudia & Iliewa, Zwetelina & Jokisch, Sabine & Kappler, Marcus & Roscher, Thomas & Schindler, Felix & Schleer, Frauke, 2012. "Endbericht an das Bundesministerium der Finanzen zum Forschungsauftrag fe 11/11: "Sparen und Investieren vor dem Hintergrund des demografischen Wandels"," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110554.
    10. Bofinger, Peter & Scheuermeyer, Philipp, 2016. "Income Distribution and Aggregate Saving: A Non-Monotonic Relationship," CEPR Discussion Papers 11435, C.E.P.R. Discussion Papers.
    11. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2009. "The long-run determinants of inequality: What can we learn from top income data?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 974-988, August.
    12. Tuomas Malinen, 2011. "Income Inequality and Savings: A Reassessment of the Relationship in Cointegrated Panels," DEGIT Conference Papers c016_076, DEGIT, Dynamics, Economic Growth, and International Trade.
    13. Tuominen Elina, 2016. "Changes or levels? Reassessment of the relationship between top-end inequality and growth," Working Papers 1609, University of Tampere, School of Management, Economics.
    14. Rémi Bazillier & Jérôme Héricourt, 2014. "The Circular Relationship between Inequality, Leverage, and Financial Crises: Intertwined Mechanisms and Competing Evidence," Working Papers 2014-22, CEPII research center.
    15. Scheuermeyer, Philipp & Bofinger, Peter, 2016. "Income Distribution and Household Saving: A Non-Monotonic Relationship," Annual Conference 2016 (Augsburg): Demographic Change 145901, Verein für Socialpolitik / German Economic Association.

    More about this item


    national savings; inequality; top incomes; panel data;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:


    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:auu:dpaper:588. 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: (). 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.

    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.