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Do Increased Private Saving Rates Spur Economic Growth?

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  • Kazimierz Laski

Abstract

Growth of aggregate demand at any given private saving rate depends on growth of private investment, export surplus and budget deficit. Slower growth of private investment in the mid-1970s has triggered stagnation trends in Europe's developed economies, caused mainly by inadequate aggregate demand. The relation between aggregate demand and the propensity to save is analysed in the present paper using the model of 'stunted growth' of Josef Steindl. The decreased utilization of capacity characteristic of stagnation can be counteracted by a reduction of the propensity to save. The most important factors determining the saving rate are distribution of incomes and the progressivity of the tax system. In many countries and periods, an inverse relation between the growth of GDP and of the private saving rate has been found and presented in the study.

Suggested Citation

  • Kazimierz Laski, 2007. "Do Increased Private Saving Rates Spur Economic Growth?," wiiw Working Papers 45, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:45
    as

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    References listed on IDEAS

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    1. Josef Steindl, 1990. "Stagnation Theory and Stagnation Policy," Palgrave Macmillan Books, in: Economic Papers 1941–88, chapter 9, pages 107-126, Palgrave Macmillan.
    2. Kazimierz Laski & Roman Römisch, 2003. "From Accession to Cohesion: Ireland, Greece, Portugal and Spain and Lessons for the Next Accession," wiiw Research Reports 298, The Vienna Institute for International Economic Studies, wiiw.
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    4. Alois Guger & Markus Marterbauer & Ewald Walterskirchen, 2006. "Growth Policy In The Spirit Of Steindl And Kalecki," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 428-442, July.
    5. Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 412-427, July.
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    More about this item

    Keywords

    aggregate demand; aggregate supply; 'stunted growth' model; private saving rate; GDP growth;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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