IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Saving and growth: another look at the cohort evidence

Listed author(s):
  • Angus Deaton

    (Princeton University)

  • Christina Paxson

    (Princeton University)

In recent years, as longer time series of cross-sectional household surveys have become available, it has become possible to look at the consumption and saving behavior of birth cohorts in a number of developing and developed economies. The cohort evidence is singularly appropriate for the analysis of life-cycle models of consumption because, at least in its simpler forms, the life-cycle hypothesis (LCH) predicts that the cohort average of the logarithm of consumption in any year can be additively decomposed into a time-invariant cohort effect and an age effect, both of which can be readily recovered from the cohort data by linear regression on dummy variables. The results of these cohort level analyses have not been favorable for the LCH interpretation of the international correlation between growth and saving. According to this, higher rates of economic growth drive up rates of national saving by expanding the lifetime resources of younger generations, who are saving, relative to the lifetime resources of older generations, who are dissaving. While it is typically possible to interpret the cohort results in a way that is consistent with the LCH, it is a good deal harder to rescue the prediction that higher growth means higher national saving rates, or at least that the effect is large enough to be consistent with the international relationship in which a one percentage point increase in the rate of per capita growth is associated with a roughly two percentage point increase in the saving rate. In Section 1, we review existing cohort studies from a range of rich and poor countries, and also present new results for Indonesia. This evidence shows no strong negative relationship between saving rates and age, so that when higher growth redistributes lifetime resources towards the young, the effect on savings is modest, and in some cases even negative.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.princeton.edu/rpds/papers/Deaton_Paxson_Saving_and_Growth_Among_Individuals_and_Households_RES.pdf
Download Restriction: no

Paper provided by Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. in its series Working Papers with number 225.

as
in new window

Length:
Date of creation: Feb 1998
Handle: RePEc:pri:rpdevs:deaton_paxson_saving_and_growth_among_individuals_and_households_res.pdf
Contact details of provider: Postal:
208 Fisher Hall, Princeton, NJ 08544

Phone: (609) 258 - 6403
Fax: (609) 258 - 5974
Web page: http://www.princeton.edu/rpds/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Tullio Jappelli & Franco Modigliani, 2006. "The Age–Saving Profile and the Life-Cycle Hypothesis," Chapters,in: Long-run Growth and Short-run Stabilization, chapter 2 Edward Elgar Publishing.
  2. Fry, Maxwell J & Mason, Andrew, 1982. "The Variable Rate-of-Growth Effect in the Life-Cycle Saving Model: Children, Capital Inflows, Interest and Growth in a New Specification of the Life-Cycle Model Applied to Seven Asian Developing Count," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 426-442, July.
  3. Paxson, Christina, 1996. "Saving and growth: Evidence from micro data," European Economic Review, Elsevier, vol. 40(2), pages 255-288, February.
  4. Angus S. Deaton & Christina Paxson, 1994. "Saving, Growth, and Aging in Taiwan," NBER Chapters,in: Studies in the Economics of Aging, pages 331-362 National Bureau of Economic Research, Inc.
  5. Orazio P. Attanasio & Hilary Williamson Hoynes, 2000. "Differential Mortality and Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 1-29.
  6. Andrew Chesher, 1997. "Diet Revealed?: Semiparametric Estimation of Nutrient Intake-Age Relationships," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 160(3), pages 389-428.
  7. Nancy Jianakoplos & Paul Menchik & Owen Irvine, 1989. "Using Panel Data to Assess the Bias in Cross-sectional Inferences of Life-Cycle Changes in the Level and Composition of Household Wealth," NBER Chapters,in: The Measurement of Saving, Investment, and Wealth, pages 553-644 National Bureau of Economic Research, Inc.
  8. Andrew Chesher, 1998. "Individual demands from household aggregates: time and age variation in the composition of diet," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 505-524.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pri:rpdevs:deaton_paxson_saving_and_growth_among_individuals_and_households_res.pdf. 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: (Bobray Bordelon)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.