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Income inequality and aggregate saving : the cross-country evidence

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  • Schmidt-Hebbel, Klaus
  • Serven, Luis

Abstract

The authors empirically review and analyze the link between income distribution and aggregate savings. Recent research has focused on the impact of income inequality and growth. Less attention has been paid to the link between inequality and savings. Once the conventional representative-agent framework is abandoned, consumption theory brings out channels through which income inequality can affect aggregate saving. The authors present new econometric evidence on the link between saving and inequality using new data on income distribution for a large cross-country sample. The results provide no evidence that income inequality affects aggregate saving across countries. This conclusion holds for both industrial and developing countries and is open to changes in measures of saving, in income distribution indicators, and in functional forms.

Suggested Citation

  • Schmidt-Hebbel, Klaus & Serven, Luis, 1996. "Income inequality and aggregate saving : the cross-country evidence," Policy Research Working Paper Series 1561, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1561
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    References listed on IDEAS

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    Cited by:

    1. Cardenas, Mauricio & Escobar, Andres, 1998. "Saving determinants in Colombia: 1925-1994," Journal of Development Economics, Elsevier, vol. 57(1), pages 5-44, October.
    2. Horst Siebert, 1998. "Commentary : economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 265-281.
    3. Siebert, Horst, 1998. "Consequences of rising income inequality: a comment," Kiel Working Papers 875, Kiel Institute for the World Economy (IfW Kiel).
    4. Jason Furman & Joseph E. Stiglitz, 1998. "Economic consequences of income inequality," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 221-263.
    5. Dominique Hachette, 1998. "Ahorro Privado en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 35(104), pages 3-48.
    6. Joel Slemrod, 1998. "The Economics of Taxing the Rich," NBER Working Papers 6584, National Bureau of Economic Research, Inc.

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