The determinants of aggregate savings
SINGH, S.
Cross-section data for 70 countries are analyzed in order to explore the determinants of aggregate savings behavior. Saving functions were estimated trying various explanatory variables. The most important variables accounting for gross national savings are capital inflow, per capita income, growth rate, the tax rate, the share of imports in GNP, the exchange rate overvaluation, and the labor participation rate. The share of wages, the rate of price increase, and the mining share in GNP were not significant explanatory variables influencing savings functions. The substitutive effect of capital inflow did not vary with the ratio of imports to GNP. The positive effect of tax rate on savings rate varied inversely with the level of development. The marginal effect of tax rate on gross national saving rate was not different from the average effect. Overall, the whole capital inflow did not markedly change the domestic investment rate. The determinants of the government saving function should be explored more intensively, particularly with the pooled time series data. An attempt should be made to find a function explaining the variation in the incremental saving-income ratio. Graphs and tables are included. 44 references.
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