Prospects for Saving and Investment in Industrial Countries

This paper examines trends in saving and investment in the major OECD countries and discusses some of the major factors, such as income growth and demographic change, that are likely to influence future developments. The paper argues that lower rates of economic growth are likely to reduce both private saving and investment in the future, but that the impact on investment will be greater than that for saving. Thus, lower growth in the OECD countries will lead to a surplus of private saving over private in vestment rather than a shortfall. Concerns about a future shortage of aggregate saving driving up interest rates should focus upon the evolution of government budget balances rather than private behavior. Demographic changes are likely to have major implications for public sector finances; but except for Japan, many of these pressures from an aging population lie several decades into the future.