Effects of Income Growth on Domestic Saving Rates: The Role of Poverty and Borrowing Constraints

Markus Brueckner, Tomoo Kikuchi and George Vachadze
Authors registered in the RePEc Author Service: Markus Brueckner

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: We study an overlapping generations model where ex-ante identical agents make an occupational choice under a borrowing constraint. Indivisible investment gives rise to entrepreneurial rents and does not allow everyone to become an entrepreneur. Competition forces entrepreneurs to save more than workers. The model predicts that growth in national income has a positive effect on domestic saving rates in poor countries but a negative effect in rich countries. Borrowing constraints increase domestic saving rates as well as the response of domestic saving to growth in income. These predictions are supported by empirical evidence based on panel data that covers 130 countries during 1960-2007.

Keywords: overlapping generations; entrepreneurship; occupational choice; saving; borrowing constraints (search for similar items in EconPapers)
JEL-codes: E2 O1 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-dge, nep-ent and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cbe.anu.edu.au/researchpapers/econ/wp636.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2016-636

Access Statistics for this paper

More papers in ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().