CENTRO STUDI IN ECONOMIA E FINANZA CENTRE FOR STUDIES IN ECONOMICS AND FINANCE WORKING PAPER no. 1 The Determinants of Saving: Lessons from Italy Tullio Jappelli and Marco Pagano MARCH 1998 DIPARTIMENTO DI SCIENZE ECONOMICHE - UNIVERSITÀ DEGLI STUDI DI SALERNO Via Ponte Don Melillo - 84084 FISCIANO (SA) Tel. 089-96 3167/3168 - Fax 089-96 3169 – e-mail:
[email protected] WORKING PAPER no. 1 The Determinants of Saving: Lessons from Italy Tullio Jappelli* and Marco Pagano* March 1998 Paper prepared for the Conference on “Determinants of Domestic Savings in Latin America”, organized by the Inter-American Development Bank, Santafè de Bogotà, 15-17 June 1996. We thank Mauricio Cardenas, Mike Gavin, Ricardo Hausmann and Ernesto Talvi for comments. * Department of Economics, Università di Salerno (Italy) and CEPR. TABLE OF CONTENTS Introduction 1. The long-run historical record 2. International perspective: the role of growth and fiscal policy 3. Other reasons for the decline in saving 3.1 Credit and insurance markets 3.2 Social security 3.3 Demographic factors 4. Do micro data help us to understand the decline in saving? 4.1 Decomposing the SHIW saving rates 4.2 Sensitivity of the results 4.3 Assessing the microeconomic evidence 5. Conclusions: can we reconcile the macro and the micro evidence? Introduction Understanding the determinants of the aggregate saving rate is a crucial prerequisite in designing a number of policy interventions, from the design of the tax and social security system to the layout of financial markets regulation. It is therefore not surprising that the analysis of saving behavior has become one of the central issues in empirical macroeconomics (see Browning and Lusardi, 1996, and Deaton, 1992 for recent surveys).