Why Aren't Developed Countries Saving?

25 Pages Posted: 29 Dec 2008

See all articles by Loretti Dobrescu

Loretti Dobrescu

University of New South Wales, School of Economics

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Alberto Motta

UNSW Australia Business School, School of Economics

Date Written: December 2008

Abstract

National saving rates differ enormously across developed countries. But these differences obscure a common trend, namely a dramatic decline over time. France and Italy, for example, saved over 17 percent of national income in 1970, but less than 7 percent in 2006. Japan saved 30 percent in 1970, but only 8 percent in 2006. And the U.S. saved 9 percent in 1970, but only 2 percent in 2006. What explains these international and intertemporal differences? Is it demographics, government spending, productivity growth or preferences? Our answer is preferences. Developed societies are placing increasing weight on the welfare of those currently alive, particularly contemporaneous older generations. This conclusion emerges from estimating two models in which society makes consumption and labor supply decisions in light of uncertainty over future government spending, productivity, and social preferences. The two models differ in terms of the nature of preference uncertainty and the extent to which current society can control future societies' spending and labor supply decisions.

JEL Classification: E21

Suggested Citation

Dobrescu, Loretti Isabella and Kotlikoff, Laurence J. and Motta, Alberto, Why Aren't Developed Countries Saving? (December 2008). NBER Working Paper No. w14580. Available at SSRN: https://ssrn.com/abstract=1320826

Loretti Isabella Dobrescu

University of New South Wales, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Laurence J. Kotlikoff (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4002 (Phone)
617-353-4449 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gaidar Institute for Economic Policy

Gazetny per. 5-3
Moscow, 125993
Russia

Alberto Motta

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

HOME PAGE: http://https://sites.google.com/site/albertomottaeconomics/

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