Saving Rates in Latin America: A Neoclassical Perspective

41 Pages Posted: 5 Sep 2019

See all articles by Andrés Fernández

Andrés Fernández

Inter-American Development Bank (IDB)

Ayse Imrohoroglu

University of Southern California - Marshall School of Business

Cesar Eduardo Tamayo Tobon

Universidad EAFIT

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Date Written: September 4, 2019

Abstract

This paper examines the time path of saving rates between 1970 and 2010 in Chile, Colombia, and Mexico through the lens of the neoclassical growth model. The findings indicate that two factors, the growth rate of TFP and fiscal policy, are able to account for some of the major fluctuations in saving rates observed during this period. In particular, we find that the model accounts for the low saving rates in Chile compared to Colombia until the late 1980s and the reversal in the saving rates thereafter. Also, a combination of high TFP growth and tax reforms that substantially reduced capital taxation seems to be responsible for the impressive increase in Chile’s saving rate in mid 1980s.

Keywords: Total factor productivity, Saving rate, Latin America

JEL Classification: E21, O47

Suggested Citation

Fernández, Andrés and Imrohoroglu, Ayse and Tamayo Tobon, Cesar Eduardo, Saving Rates in Latin America: A Neoclassical Perspective (September 4, 2019). Center for Research in Economics and Finance (CIEF), Working Papers, No. 19-12, 2019. Available at SSRN: https://ssrn.com/abstract=3447689 or http://dx.doi.org/10.2139/ssrn.3447689

Andrés Fernández (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Ayse Imrohoroglu

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States
213-740-6518 (Phone)
213-740-6650 (Fax)

Cesar Eduardo Tamayo Tobon

Universidad EAFIT ( email )

Carrera 49 N° 7 sur – 50
Bogotá, Antioquia 00000
Colombia

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