On the Theory of Productive Saving

61 Pages Posted: 19 Jun 2004 Last revised: 14 Mar 2021

See all articles by Isaac Ehrlich

Isaac Ehrlich

State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)

Uri Ben-Zion

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management; National Bureau of Economic Research (NBER)

Date Written: 1975

Abstract

The central thesis of this paper is that the management of portfolios incorporating a variety of investment assets does require the use of time and other scarce resources in searching for, collecting, interpreting, and applying relevant information. Accordingly, the returns on these assets would depend, in part, on managerial efforts and abilities and other related inputs. The plan of the paper is as follows. A life cycle model of consumption and productive saving without borrowing is developed in Section I. Borrowing is introduced into the model and its relationship to productive saving is explored in Section II. In Section III we attempt to elucidate the model's implications concerning capital accumulation paths and life cycle variations in resource allocations to productive activities. Implications regarding the determinants of the propensity to save are derived in Section IV and then briefly examined in light of some earlier theoretical and empirical findings.

Suggested Citation

Ehrlich, Isaac and Ben-Zion, Uri, On the Theory of Productive Saving (1975). NBER Working Paper No. w0071, Available at SSRN: https://ssrn.com/abstract=259383

Isaac Ehrlich (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

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Uri Ben-Zion

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