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China’s household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped. We find that rising income uncertainty and pension reforms help explain both of these phenomena. Using a panel of Chinese households covering the period 1989-2006, we document that strong average income growth has been accompanied by a substantial increase in income uncertainty. Interestingly, the permanent variance of household income remains stable while it is the transitory variance that rises sharply. A calibration of a buffer-stock savings model indicates that rising savings rates among younger households are consistent with rising income uncertainty and higher saving rates among older households are consistent with a decline in the pension replacement ratio for those retiring after 1997. We conclude that rising income uncertainty and pension reforms can account for over half of the increase in the urban household savings rate in China since the mid-1990s as well as the U-shaped age-profile of savings.

Labor --- Macroeconomics --- Public Finance --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Macroeconomics: Consumption --- Saving --- Wealth --- Aggregate Factor Income Distribution --- Nonwage Labor Costs and Benefits --- Private Pensions --- Wages, Compensation, and Labor Costs: General --- Social Security and Public Pensions --- Pensions --- Labour --- income economics --- Income --- Wages --- Income shocks --- Pension reform --- National accounts --- Expenditure --- China, People's Republic of --- Saving and investment --- Income economics

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This paper explores, from an investment-saving perspective, the factors underlying the persistent widening of the current account surplus in the Netherlands since the early 1980s. Standard intertemporal models, even appropriately extended to incorporate specific features of the Dutch economy, do not appear to fully account for this development. Accordingly, the paper focusses attention on the production side of the economy to gain further insight into the trends of the current account. Empirical evidence suggests that changes in relative factor prices and a relative demand shift toward non-tradable goods account for the bulk of the observed widening of the current account surplus. In turn, the impact of these factors on the current account appears to reflect both changes in factor proportions and deviations from perfect competition in the Dutch sheltered sector.

Balance of payments --- Capacity --- Capital and Total Factor Productivity --- Cost --- Current Account Adjustment --- Current account surpluses --- Current account --- Exports and Imports --- Income economics --- Industrial productivity --- International economics --- Intertemporal Consumer Choice --- Labor economics --- Labor Economics: General --- Labor --- Labour --- Life Cycle Models and Saving --- Macroeconomics --- Open Economy Macroeconomics --- Production and Operations Management --- Production --- Real wages --- Short-term Capital Movements --- Total factor productivity --- Wages --- Wages, Compensation, and Labor Costs: General --- Netherlands, The

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Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data in the 2000s, precautionary saving is sizable and the marginal propensity to consume out of permanent shocks is below one, in stark contrast to the predictions of the perfect foresight model. The optimal investment rate is high if productivity in the tradable sector is high enough.

Exports --- Petroleum --- Saving and investment --- Accumulation, Capital --- Capital accumulation --- Capital formation --- Investment and saving --- Saving and thrift --- Capital --- Supply-side economics --- Wealth --- Investments --- Coal-oil --- Crude oil --- Oil --- Caustobioliths --- Mineral oils --- International trade --- Econometric models. --- Macroeconomics --- Production and Operations Management --- Macroeconomics: Consumption --- Saving --- Investment --- Intangible Capital --- Capacity --- Fiscal Policy --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Aggregate Factor Income Distribution --- Macroeconomics: Production --- Income --- Consumption --- Income shocks --- Precautionary savings --- Productivity --- Economics --- Industrial productivity

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We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.

Business & Economics --- Economic Theory --- Risk. --- Saving and investment. --- Accumulation, Capital --- Capital accumulation --- Capital formation --- Investment and saving --- Saving and thrift --- Capital --- Supply-side economics --- Wealth --- Investments --- Economics --- Uncertainty --- Probabilities --- Profit --- Risk-return relationships --- Investments: Commodities --- Exports and Imports --- Macroeconomics --- Macroeconomics: Consumption --- Saving --- Investment --- Intangible Capital --- Capacity --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Economic Growth and Aggregate Productivity: General --- Aggregate Factor Income Distribution --- Current Account Adjustment --- Short-term Capital Movements --- Agriculture: General --- International economics --- Investment & securities --- Precautionary savings --- Income --- Income shocks --- Current account surpluses --- Agricultural commodities --- National accounts --- Balance of payments --- Commodities --- Saving and investment --- Farm produce --- United States

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We develop an overlapping generations model of a developing economy in which ‘culture’ and technology interact to determine savings, investment and growth. Investment is assumed to involve intermediation or other costs which may, in each period, result in either of two stable equilibria for the savings rate. At the “good” equilibrium, savings and growth are higher than at the “bad” equilibrium, whether the country attains the good or bad equilibrium in any period depends on each individual’s belief about the savings behavior of other agents in the economy. The model implies that fiscal policy or public activities to facilitate private investment can influence saving. In particular, a sustained period of fiscal restraint can shift the economy onto a higher savings and growth path.

Banks and Banking --- Econometrics --- Investments: Stocks --- Macroeconomics --- General Equilibrium and Disequilibrium: General --- Intertemporal Consumer Choice --- Life Cycle Models and Saving --- Fiscal Policies and Behavior of Economic Agents: General --- Aggregate Factor Income Distribution --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Neoclassical --- Labor Economics: General --- Interest Rates: Determination, Term Structure, and Effects --- Investment & securities --- Econometrics & economic statistics --- Labour --- income economics --- Finance --- Income --- Stocks --- Overlapping generations models --- Labor --- Real interest rates --- National accounts --- Financial institutions --- Econometric analysis --- Financial services --- Equilibrium --- Economics --- Labor economics --- Interest rates --- Japan --- Income economics