Productivity growth and the U.S. saving rate

Over the last half century, the saving rate in the United States exhibited significant variations. In this paper, I examine whether a general equilibrium model that allows for shifts in the growth rate of total factor productivity can account for these variations. The model generates significant med...

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Bibliographic Details
Published in:Economic modelling 2011, Vol.28 (1), p.501-514
Main Author: Iscan, Talan B
Format: Article
Language:English
Subjects:
Consumption
Consumption-income ratio Saving rate Productivity growth United States
Consumption–income ratio
Economic models
Growth rate
Growth rates
Macroeconomics
Productivity
Productivity growth
Saving rate
Savings
Studies
Total factor productivity
U.S.A
United States
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Summary:Over the last half century, the saving rate in the United States exhibited significant variations. In this paper, I examine whether a general equilibrium model that allows for shifts in the growth rate of total factor productivity can account for these variations. The model generates significant medium-run variations in the U.S. saving rate, and establishes a link between episodes of productivity growth slowdowns or accelerations and the saving rate—two concepts that have often been treated in isolation. While a productivity-growth based explanation is able to account for broader trends in the rising consumption–income ratio from about 1980 to 2000, there are other episodes during which the model is less successful.
ISSN:0264-9993
1873-6122
DOI:10.1016/j.econmod.2010.07.003