Public policies and saving in developing countries

Abstract

Developing countries can increase their national saving rate best by increasing government saving. The most effective way to increase national saving is through a permanent tax hike, a cut in current public spending, and a macroeconomic framework in which inflation is low and incentives are predictable.The Policy, Rescarch. and Extemal Affair Complex distributes PRE Working Papers todissesninate the findings odwork in progrerA and to encouruge the exchange of ideas among Banrk staff ard all others interested in dcvclopment issues. Ihese papers carry the names of the authors, reflect only their views, and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own. 'hey should not he atributed to the World Bank. its Board of Directon. its management, or any of iLs mcmber coun;ries.

Savings in Chile: What Went Right?

“…The positive correlation between savings and income levels, which has been documented by a number of empirical studies (e.g., Collins, 1991;Carroll and Weil, 1994;Edwards, 1995, Schmidt-Hebbel et al, 1992 does prevail for Chile, according to both eye inspection of Figures 2 and 3 and the correlation matrices in Tables 1 and 2. However, such a positive association is: (a) stronger for figures in 1986 pesos than for figures as percentage of GDP (around 0.9 in the former case and around 0.7 in the latter); (b) significantly higher for the last ten years than for the previous 25 years ( correlations range between 0.8 and 0.97 for 1985-1995, while they are between minus 0.29 (!)…”

Corruption, the resource curse and genuine saving

“…Within the last fifteen years, a number of studies have analysed the empirical determinants of gross private or gross national saving 4 using panel data and reduced-form models (Edwards, 1996;Dayal-Gulati and Thimann, 1997;Loayza et al, 2000;Corbo and Schmidt-Hebbel, 1991;Masson et al, 1995;Haque et al, 1999;Samwick, 2000). Across all studies, four variables appear to have a robust and significant effect on gross saving: (i) per capita income, (ii) economic growth, (iii) age dependency and (iv) urbanisation.…”

Determinants of Saving in Poland: Are They Different from Those in Other OECD Countries?

“…• Productivity/income growth rate: Productivity growth positively affects household saving, because its beneficiaries (workers) tend to save more, but if agents are able to shift consumption intertemporally and productivity increases permanently, they might be tempted to borrow against future increases in income, which results in decreased saving. Evidence from the saving regressions is in favor of the former effect, and the coefficients on productivity or the income growth rate usually turn out to be positive (see Corbo and Schmidt-Hebbel 1991;Loayza et al 2000;De Serres and Pelgrin 2003). • Fiscal policy (public sector saving): According to the Ricardian equivalence hypothesis, forward-looking agents are fully aware of the fact that current government borrowing will eventually be financed by deferred taxation.…”