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Inequality and Saving: Further Evidence from Integrated Economies
Author(s) -
Gu Xinhua,
Huang Bihong,
Tam Pui Sun,
Zhang Yang
Publication year - 2015
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12125
Subject(s) - economics , inequality , consumption (sociology) , order (exchange) , production (economics) , china , emerging markets , empirical evidence , economic inequality , macroeconomics , panel data , monetary economics , finance , econometrics , mathematical analysis , social science , philosophy , mathematics , epistemology , sociology , political science , law
Renewed attention to inequality and saving has arisen owing to their pronounced implications for global imbalances and financial crises. We show that the relationship between saving and inequality is negative if savers' funds are borrowed by spending households for consumption as in the USA , but positive if saving is allocated through financial systems to investing firms for production as in C hina. This theoretical result is largely consistent with empirical evidence found from these two increasingly integrated economies and other related countries by estimating panel‐data models. The policy implication is that inequality must be reduced in order to increase saving in the USA and other O rganisation for E conomic C o‐operation and D evelopment ( OECD ) countries and to boost consumption in China and other parts of emerging A sia.