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Household saving in developing countries : first cross-country evidence

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  • Schmidt-Hebbel, Klaus*Webb, Steven B.*Corsetti,

Abstract

This study uses time-series of household data from eleven developing countries to test several hypotheses about saving behavior. Besides just widening the scope of information being used to test the hypotheses, the data set in this study has the advantage of a consistent definition across countries. With these data the authors test how household saving in developing countries responds to the level of per capita disposable income, the rate of growth of disposable income and its deviation from trend, real liquid wealth at the start of the period, the real interest rate, the inflation rate, foreign saving, government transfers to households, and some demographic variables. The results show that income and wealth variables affect saving strongly and in ways consistent with standard theories. Inflation and the interest rate do not show clear effects on saving, which is also consistent with their theoretical ambiguity. Foreign saving and monetary wealth have strong negative effects on household saving, indicating the importance of liquidity constraints in developing countries.

Suggested Citation

  • Schmidt-Hebbel, Klaus*Webb, Steven B.*Corsetti,, 1991. "Household saving in developing countries : first cross-country evidence," Policy Research Working Paper Series 575, The World Bank.
    • Handle: RePEc:wbk:wbrwps:575
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