The Productivity Slowdown and the Savings Shortfall: A Challenge to the Permanent Income Hypothesis

Alan Viard ()

Economic Inquiry, 1993, vol. 31, issue 4, 549-63

Abstract: The author argues that the savings decline following the post-1973 productivity slowdown discredits the permanent income hypothesis. The permanent income hypothesis predicts that a reduction in expected future income growth should cause an increase in saving. The author shows that economic agents revised downward their expectations of future growth after 1973 but that the saving rate declined. Other economic events during this period cannot explain this discrepancy. Copyright 1993 by Oxford University Press.

Date: 1993
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