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Fear of Nuclear War and Intercountry Differences in the Rate of Saving

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  • Joel Slemrod

Abstract

This paper demonstrates that a survey-based measure of the perceived likelihood of nuclear war in a country is negatively correlated with the country's rate of net private saving, holding other determinants of saving constant. This result is established using date on twenty OECD countries for the period 1981-4. The measure of the perceived likelihood of nuclear war is calculated from surveys conducted in each country by the Gallup International Research Institutes. The magnitude of the estimated' effect Is large, suggesting that an increase of 10 percent in the fraction of the population that believes a world war is likely is associated with a decline of 4.1 percentage points in the net private saving rate, This finding is consistent with other evidence based on U.S. aggregate time series end cross-individual data suggesting that fear of nuclear war decreases savings. That proposition has profound implications for the interpretation of the performance of the post-nuclear world economy.

Suggested Citation

  • Joel Slemrod, 1988. "Fear of Nuclear War and Intercountry Differences in the Rate of Saving," NBER Working Papers 2801, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2801
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    1. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
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    Cited by:

    1. David Altig, 1990. "The case of the missing interest deductions: will tax reform increase U. S. saving rates?," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 22-34.
    2. Hendershott, Patric H & Peek, Joe, 1992. "Treasury Bill Rates in the 1970s and 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 195-214, May.
    3. 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.
    4. Skidmore, Mark, 2001. "Risk, natural disasters, and household savings in a life cycle model," Japan and the World Economy, Elsevier, vol. 13(1), pages 15-34, January.
    5. Jeffrey A. Frankel, 1991. "Japanese Finance in the 1980s: A Survey," NBER Chapters,in: Trade with Japan: Has the Door Opened Wider?, pages 225-270 National Bureau of Economic Research, Inc.
    6. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic consequences of terror: theory and the case of Israel," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 971-1002, July.

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