Is Piketty’s ‘Second Law of Capitalism’ fundamental?

Per Krusell, Tony Smith, 1 June 2014

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Over the last several weeks, we have thought quite a bit about the main message in Thomas Piketty’s now world-famous book, Capital in the Twenty-First Century (Piketty 2014). We have also discussed it at great length with colleagues.

Topics: Poverty and income inequality
Tags: growth, Inequality, saving, savings, wealth

Why are savings so high among the young in urban China?

Mark R. Rosenzweig, Junsen Zhang, 21 May 2014

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A well-known phenomenon in contemporary China is the high personal savings rates of households compared with those in developed countries and many low-income countries. A less-studied aspect of this is the elevated savings rates of the young relative to the middle-aged, first shown by Chamon and Prasad (2010) based on urban household data covering the years 1986–2005 for ten provinces.

Topics: Frontiers of economic research, Global economy
Tags: China, family, housing, one-child policy, savings

Why Asian firms hold cash

Charles Yuji Horioka, Akiko Terada-Hagiwara, 25 January 2014

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In many, if not most, economies, sharp declines in household saving rates have been offset by sharp increases in corporate saving rates for the past two decades (see, for example, Karabarbounis and Neiman 2012). Even so, relatively little research has been done on the determinants of corporate saving.

Topics: Financial markets
Tags: Asia, borrowing constraints, corporate saving, financial frictions, investment, saving, savings

China’s one-child policy and saving puzzle

Taha Choukhmane, Nicolas Coeurdacier , Keyu Jin, 22 January 2014

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The Chinese household saving rate is high and has been rising sharply. Between 1983 and 2011, the average urban household saving rate rose by about 20 percentage points – from 10.4% to a staggeringly high level of 30.5%. This stands in sharp contrast with the low household savings rate in developed countries (about 5% in OECD economies).

Topics: Education, Gender, Microeconomic regulation
Tags: China, demographics, fertility, one-child policy, savings

Save more to improve infrastructure in Latin America and the Caribbean

Eduardo Cavallo, 3 April 2013

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Saving and investment, like the chicken and the egg, involve circular causality. But regardless of causality, there is no doubt that Latin America and the Caribbean need more of both.

That the region has an infrastructure problem hardly requires an explanation:

Topics: Development
Tags: Caribbean, investment, Latin America, savings

Oil exporters’ dilemma: How much to save and how much to invest

Reda Cherif, Fuad Hasanov, 10 November 2012

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Policymakers in many commodity-exporting countries confront the question of how much to consume, save, and invest out of revenues from commodity exports (see van der Ploeg and Venables 2008). In the face of highly volatile commodity revenues (especially from oil), governments have to balance several objectives at the same time.

Topics: Energy, Macroeconomic policy
Tags: investment, oil exports, savings

Precautionary savings in the Great Recession

Ashoka Mody, Damiano Sandri, Franziska Ohnsorge, 22 February 2012

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A key feature of the Great Recession was a striking increase in uncertainty. The volatility of real GDP increased (left chart in Figure 1) and, at the same time, the higher unemployment rate raised the risks of job losses, longer unemployment durations, and, hence, of severe reductions in income (see Carroll 1992 for a similar interpretation of unemployment rates).

Topics: Macroeconomic policy
Tags: crises, OECD, savings

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