How Much Should a Nation Save? A New Answer

Olivier de La Grandville ()
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Olivier de La Grandville: Stanford University

Studies in Nonlinear Dynamics & Econometrics, 2012, vol. 16, issue 2, 36

Abstract: We introduce a formula for the optimal savings rate in an economy driven by an investment policy reflecting competitive equilibrium. The reasonable numbers generated by the formula should be of help not only to assess our present situation, but also to prepare our future. Moreover, this paper provides two theorems correcting a widely spread error in economic growth theory, namely that a steady state can be asymptotically reached only if technical progress is labor-augmenting. We finally show that the magnitudes of the optimal savings rates are highly robust to very different, S-shaped evolutions of population and technology. The paper closes with a daring conjecture.

Date: 2012
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DOI: 10.1515/1558-3708.1908

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