Savings Behaviour, Fertility and Economic Development in Nineteenth Century Britain and America

This paper reviews evidence that life-cycle saving became the norm in nineteenth-century America, with a consequent fall in fertility and rise in the rate of capital formation, and considers whether a similar transition to life-cycle saving can be observed in nineteenth-century Britain. Although there is extensive evidence of widespread saving by British workers, most of this saving did not fit a life-cycle pattern. Liquidity constraints forced British workers to borrow, buy on credit, save only for short-run ends, and abstain from long-run accumulation. The paper concludes that some of the apparent difference between the savings behaviour of British and American workers may be the result of a misreading of United States evidence, some may be due to differences in old-age welfare systems, but that the most plausible explanation is that the real income of British workers in this period was substantially below that of their American counterparts.