Household Saving in Developing Countries: First Cross-Country Evidence

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Abstract
Although most studies have relied on domestic or private sector saving data, this article uses household data available from the U.N. System of National Accounts for a sample of 10 countries. Household saving functions are estimated using combined time-series and cross-country observations in order to test households' responses to income and growth, rates of return, monetary wealth, foreign saving, and demographic variables. The results show that income and wealth variables affect saving strongly and in ways consistent with standard theories. Inflation and the interest rate do not show clear effects on saving, which is also consistent with their theoretical ambiguity. Foreign saving and monetary assets have strong negative effects on household saving, which suggests the importance of liquidity constraints and monetary wealth in developing countries.
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