The savings multiplier

Mehlum, Halvor, Torvik, Ragnar and Valente, Simone (2016) The savings multiplier. Journal of Monetary Economics, 83. pp. 90-105. ISSN 0304-3932

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A theory of macroeconomic development based on the novel concept of savings multiplier is developed. Capital accumulation changes relative prices, amplifying incentives to save as the economy grows. The savings multiplier hinges on two mechanisms. First, accumulation raises wages and leads to redistribution from the consuming old to the saving young. Second, higher wages raise the price of old-age care and, in anticipation of this, the young save more. Our theory captures important aspects of China’s development and suggests new channels through which the one child policy and the dismantling of social benefits have fueled China’s savings rates.

Item Type: Article
Uncontrolled Keywords: intertemporal choices,china's savings puzzle,overlapping generations
Faculty \ School: Faculty of Social Sciences > School of Economics
UEA Research Groups: Faculty of Social Sciences > Research Groups > Environment, Resources and Conflict
Faculty of Social Sciences > Research Groups > Economic Theory
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Depositing User: Pure Connector
Date Deposited: 24 Sep 2016 00:55
Last Modified: 04 Mar 2024 17:31
DOI: 10.1016/j.jmoneco.2016.08.009


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