IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v27y2023i2p482-505_9.html
   My bibliography  Save this article

Transitional dynamics of the saving rate and economic growth

Author

Listed:
  • Brueckner, Markus
  • Kikuchi, Tomoo
  • Vachadze, George

Abstract

We estimate the relationship between GDP per capita growth and the growth rate of the national saving rate using a panel of 130 countries over the period 1960–2017. We find that GDP per capita growth increases (decreases) the growth rate of the national saving rate in poor countries (rich countries), and a higher credit-to-GDP ratio decreases the national saving rate as well as the income elasticity of the national saving rate. We develop a model with a credit constraint to explain the growth-saving relationship by the saving behavior of entrepreneurs at both the intensive and extensive margins. We further present supporting evidence for our theoretical findings by utilizing cross-country time series data of the number of new businesses registered and the corporate saving rate.

Suggested Citation

  • Brueckner, Markus & Kikuchi, Tomoo & Vachadze, George, 2023. "Transitional dynamics of the saving rate and economic growth," Macroeconomic Dynamics, Cambridge University Press, vol. 27(2), pages 482-505, March.
    • Handle: RePEc:cup:macdyn:v:27:y:2023:i:2:p:482-505_9
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100521000493/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hillebrand, Marten & Kikuchi, Tomoo & Sakuragawa, Masaya, 2018. "Bubbles And Crowding-In Of Capital Via A Savings Glut," Macroeconomic Dynamics, Cambridge University Press, vol. 22(5), pages 1238-1266, July.
    2. Kikuchi, Tomoo & Vachadze, George, 2015. "Financial liberalization: Poverty trap or chaos," Journal of Mathematical Economics, Elsevier, vol. 59(C), pages 1-9.
    3. Francisco J. Buera & Yongseok Shin, 2013. "Financial Frictions and the Persistence of History: A Quantitative Exploration," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 221-272.
    4. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    5. Chen, Peter & Karabarbounis, Loukas & Neiman, Brent, 2017. "The global rise of corporate saving," Journal of Monetary Economics, Elsevier, vol. 89(C), pages 1-19.
    6. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2013. "Income and Health Spending: Evidence from Oil Price Shocks," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1079-1095, October.
    7. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    8. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    9. Huw Lloyd-Ellis & Dan Bernhardt, 2000. "Enterprise, Inequality and Economic Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(1), pages 147-168.
    10. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    11. David K. Levine & William R. Zame, 2002. "Does Market Incompleteness Matter?," Econometrica, Econometric Society, vol. 70(5), pages 1805-1839, September.
    12. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    13. Tullio Jappelli & Marco Pagano, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 83-109.
    14. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    15. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    16. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
    17. Maitreesh Ghatak & Massimo Morelli & Tomas Sjöström, 2001. "Occupational Choice and Dynamic Incentives," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 781-810.
    18. Philippe Aghion & Patrick Bolton, 1997. "A Theory of Trickle-Down Growth and Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 151-172.
    19. John Laitner, 2000. "Structural Change and Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(3), pages 545-561.
    20. Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 173-189.
    21. Kikuchi, Tomoo & Stachurski, John, 2009. "Endogenous inequality and fluctuations in a two-country model," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1560-1571, July.
    22. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014.
    23. Kikuchi, Tomoo & Stachurski, John & Vachadze, George, 2018. "Volatile capital flows and financial integration: The role of moral hazard," Journal of Economic Theory, Elsevier, vol. 176(C), pages 170-192.
    24. Francisco Buera, 2009. "A dynamic model of entrepreneurship with borrowing constraints: theory and evidence," Annals of Finance, Springer, vol. 5(3), pages 443-464, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Markus Brueckner & Tomoo Kikuchi & George Vachadze, 2016. "Effects of Income Growth on Domestic Saving Rates: The Role of Poverty and Borrowing Constraints," ANU Working Papers in Economics and Econometrics 2016-636, Australian National University, College of Business and Economics, School of Economics.
    2. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540, Elsevier.
    3. Vincenzo Quadrini, 2009. "Entrepreneurship in macroeconomics," Annals of Finance, Springer, vol. 5(3), pages 295-311, June.
    4. Ghatak, Maitreesh & Nien-Huei Jiang, Neville, 2002. "A simple model of inequality, occupational choice, and development," Journal of Development Economics, Elsevier, vol. 69(1), pages 205-226, October.
    5. Karaivanov, Alexander, 2012. "Financial constraints and occupational choice in Thai villages," Journal of Development Economics, Elsevier, vol. 97(2), pages 201-220.
    6. Inci, Eren, 2013. "Occupational choice and the quality of entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 1-21.
    7. Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5, Elsevier.
    8. Falkinger, Josef & Grossmann, Volker, 2013. "Oligarchic land ownership, entrepreneurship, and economic development," Journal of Development Economics, Elsevier, vol. 101(C), pages 206-215.
    9. Francisco J Buera & Joseph P Kaboski & Yongseok Shin, 2021. "The Macroeconomics of Microfinance," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 126-161.
    10. Karaivanov, Alexander & Yindok, Tenzin, 2022. "Involuntary entrepreneurship – Evidence from Thai urban data," World Development, Elsevier, vol. 149(C).
    11. José Wynne, 2005. "Wealth as a Determinant of Comparative Advantage," American Economic Review, American Economic Association, vol. 95(1), pages 226-254, March.
    12. Yuki, Kazuhiro, 2008. "Sectoral Shift, Wealth Distribution, And Development," Macroeconomic Dynamics, Cambridge University Press, vol. 12(4), pages 527-559, September.
    13. Manuel Oechslin, 2009. "Creditor protection and the dynamics of the distribution in oligarchic societies," Journal of Economic Growth, Springer, vol. 14(4), pages 313-344, December.
    14. Mookherjee, Dilip & Napel, Stefan, 2021. "Welfare rationales for conditionality of cash transfers," Journal of Development Economics, Elsevier, vol. 151(C).
    15. Keith Blackburn & David Chivers, 2015. "Fearing the worst: the importance of uncertainty for inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 345-370, October.
    16. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2015. "Entrepreneurship and Financial Frictions: A Macrodevelopment Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 409-436, August.
    17. Jaimovich, Esteban, 2011. "Sectoral differentiation, allocation of talent, and financial development," Journal of Development Economics, Elsevier, vol. 96(1), pages 47-60, September.
    18. Oleg Itskhoki & Benjamin Moll, 2019. "Optimal Development Policies With Financial Frictions," Econometrica, Econometric Society, vol. 87(1), pages 139-173, January.
    19. Dilip Mookherjee & debraj Ray, 2005. "Occupational Diversity and Endogenous Inequality," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-142, Boston University - Department of Economics.
    20. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:27:y:2023:i:2:p:482-505_9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.