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Household Saving: An Econometric Investigation

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  • Patric H. Hendershott
  • Joe Peek

Abstract

Household or personal saving is recomputed to include net purchases of consumer durables, net contributions to government life insurance and pension reserves, and an adjustment for the inflation premium component in interest income. These adjustments raise the measured household saving rate by nearly 5 percentage points in the 1965-75 period but result in an extremely sharp 7 percentage point decline in the rate between 1975 and the early 1980s. A model of household saving behavior is then presented and estimated using annual data from the 1952-82 period. While saving responds to numerous influences, major swings in the adjusted saving rate -- a significant decline in the 1950s and rebound in the early 1960s, as well as the decline since 1975 -- are largely explained by two variables: the wealth/income ratio and the growth rate of real income.

Suggested Citation

  • Patric H. Hendershott & Joe Peek, 1984. "Household Saving: An Econometric Investigation," NBER Working Papers 1383, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1383
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    File URL: http://www.nber.org/papers/w1383.pdf
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    Cited by:

    1. Russett, Bruce & Slemrod, Joel, 1993. "Diminished Expectations of Nuclear War and Increased Personal Savings: Evidence from Individual Survey Data," American Economic Review, American Economic Association, vol. 83(4), pages 1022-1033, September.
    2. Patric H. Hendershott & Joe Peek, 1987. "Private Saving in the United States: 1950-85," NBER Working Papers 2294, National Bureau of Economic Research, Inc.

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