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Why Italy's saving rate became (so) low?

Listed author(s):
  • Luigi Pierfranco Campiglio


    (DISCE, Università Cattolica)

The aim of this paper is to explain why a low and declining saving rate should be a problem in a world of free capital flows and increasing wealth. In Italy consumer households’ saving have been the main driver of economic stability and growth, funding investments and public debt, and despite international turbulences Italy was acknowledged as a high saving country until the early 1990’s. Ever since, however, households saving rate plunged, in spite of an increasing financial wealth, and our aim is to explain why: we suggest two main causes. The first is related to the economic policies implemented to deal with four major economic events, prompted by economic misalignments: a) the 1992’s currency crisis, b) the run-up to the Euro, c) the 2006’ turning point, preceding the 2008’s crisis, and d) the 2009’s public debt crisis and the following policy of fiscal consolidation. These four events were dealt with economic policies which overlooked the huge income and saving shifts from households to government and private sectors: rising tax burden, especially indirect taxes, freezing of nominal public expenditures and falling real wages were the main policy instruments, while a decreasing households’ income and saving was a primary consequences. Households have been struggling to smooth their standard of life drawing on their saving and wealth, but the effort became all the more difficult as the saving rate was falling below a critical level, increasing the probability of negative saving and debt. Gross national saving turned less than aggregate investment, prompting an increasing borrowing from abroad and a corresponding negative current account. The second cause is structural and covers two crucial issues: the first is the deep economy impacts of a changing age structure, as a consequence of a sudden fertility drop. The second issue is related to the falling households size composition jointly with the rising share of quasi-fixed costs necessary for a decent life. We show how and why a well designed Welfare State could help to restore income stability and saving, tackling the widespread problem of changing age structure in most countries.

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Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Politica Economica with number ispe0063.

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Length: 52
Date of creation: Feb 2013
Handle: RePEc:ctc:serie5:ispe0063
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  1. Giuseppina Malerba, 2011. "Le disuguaglianze regionali nella distribuzione del reddito. Parte seconda: Un'analisi delle famiglie italiane a rischio di povertà," DISCE - Quaderni dell'Istituto di Politica Economica ispe0057, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Maurizio Motolese, 2003. "Endogenous uncertainty and the non-neutrality of money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 317-345, 03.
  3. Caruso, Raul & Schneider, Friedrich, 2013. "Brutality of Jihadist terrorism. A contest theory perspective and empirical evidence in the period 2002–2010," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 685-696.
  4. Luigi Pierfranco Campiglio, 2011. "Libertà del vivere una vita civile e deprivazione economica," DISCE - Quaderni dell'Istituto di Politica Economica ispe0058, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  5. Carsten K. Nielsen, 2009. "Optimal economic institutions under rational overconfidence, with applications to the choice of exchange rate regime," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(4), pages 375-407.
  6. Luigi CAMPIGLIO, 2006. "Interessi economici, potere politico e rappresentanza parlamentare in Italia nel periodo 1948-2002," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 114(1-2), pages 37-66.
  7. Carsten Krabbe Nielsen, 2004. "Rational overconfidence and excess volatility in general equilibrium," Econometric Society 2004 Latin American Meetings 157, Econometric Society.
  8. Marta Spreafico, 2010. "What do we know about the link between growth and institutions?," DISCE - Quaderni dell'Istituto di Politica Economica ispe0053, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  9. Raul Caruso & Marco Di Domizio, 2012. "Hooliganism and demand for football in Italy. Evidence for the period 1962-2011," DISCE - Quaderni dell'Istituto di Politica Economica ispe0062, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  10. Giuseppina Malerba, 2009. "Le disuguaglianze regionali nella distribuzione del reddito. Parte prima: Un'analisi della povertà delle famiglie italiane," DISCE - Quaderni dell'Istituto di Politica Economica ispe0052, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  11. Marco Arnone & Carlo Bellavite Pellegrini & Franco Timpano, 2004. "Modelli di Agenzie di Sviluppo Regionale: Analisi Teorica ed Evidenza Empirica," Development and Comp Systems 0404004, EconWPA.
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