Top Incomes and National Savings

18 Pages Posted: 27 Apr 2009

See all articles by Andrew Leigh

Andrew Leigh

Australian House of Representatives Parliament House; Centre for Applied Macroeconomic Analysis, ANU; IZA

Alberto A. Posso

RMIT University

Abstract

The relationship between income inequality and national savings is theoretically ambiguous, and past empirical studies have delivered mixed results. We revisit the question using a newly available source of data on inequality: the income share of the richest 10 percent and the richest 1 percent. Combining this with historical data on national savings rates, we are able to investigate the relationship for 11 developed countries over the period 1921–2002. We find no consistent relationship between lagged top income shares and current savings rates, and our standard errors are small enough that we are able to reject more than modest effects in either direction. We view this as suggesting that inequality at the top end of the distribution is not a major driver of national savings rates.

Suggested Citation

Leigh, Andrew and Posso, Alberto A, Top Incomes and National Savings. Review of Income and Wealth, Vol. 55, Issue 1, pp. 57-74, March 2009, Available at SSRN: https://ssrn.com/abstract=1395459 or http://dx.doi.org/10.1111/j.1475-4991.2008.00303.x

Andrew Leigh (Contact Author)

Australian House of Representatives Parliament House ( email )

Canberra, 2600
Australia

Centre for Applied Macroeconomic Analysis, ANU ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

IZA ( email )

Alberto A Posso

RMIT University ( email )

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