International Evidence on the Determinants of Private Saving

A broad set of possible determinants of private saving behavior is examined using data for a large sample of industrial and developing countries. Both time-series and cross-sectional estimates are obtained. Results suggest that there is a partial offset on private saving of changes in public saving and (for developing countries) in foreign saving, that demographics and groivth are important determinants of private saving rates, and that interest rates and terms of trade have positive, but less robust, effects. Increases in per capita gross domestic product seem to increase saving at low income levels (rela-tive to the United States) but decrease it at higher ones. Despite an extensive literature on saving behavior, several empirical issues have not been resolved conclusively, including the effects of real interest rates, demo-graphic factors, and per capita income on private saving; the relationship be-tween growth and saving; and the extent to which private saving offsets move-ments in public (dis)saving (Aghevli and others 1990 and Deaton 1992). This article extends the empirical knowledge of private saving behavior by exploiting data for a large sample of industrial and developing countries and by looking at