Saving and the Accumulation of Wealth

Two major issues have troubled economists in recent work on saving: First, what was the cause of the substantial decline in the saving rate of most industrialized countries over the past two decades, and second, why has the traditional life cycle theory of saving, which seemed to offer an acceptable explanation for aggregate saving patterns, produced unsatisfactory results when faced with macro data? Drawing heavily on Italian data, this book provides new explanations for both questions. For many years Italy had one of the highest saving rates of leading industrial countries, but the rate's decline in recent years has been more pronounced than in other countries. At the same time, Italy has combined an extremely generous social security and government transfer system with relatively less-developed capital markets. The simultaneous presence of these two features makes it possible to assess the impact on saving decisions of the growth in government and private transfers of capital market imperfections, both individually and in combination. This book offers original contributions on most of the significant aspects of saving and consumption behavior. It reveals new evidence on the relative importance of precautionary saving and the bequest motive; it provides further explanations for the increased tendency to save of younger consumers and the slow rate of wealth decumulation of the elderly. The controversial role of liquidity constraints is a recurrent theme; these are seen to shape many aspects of households' behavior, from the durable/non-durable tradeoff to the timing of intervivos transfers. The articles that make up this volume should be of interest to economists working to advance ourknowledge of the determinants of personal consumption and saving patterns, the consequences of capital market imperfections and the relationships between fiscal policy and saving.

Foreword Antonio Fazio; List of contributors; List of figures; List of tables; Acknowledgements; Introduction Albert Ando, Luigi Guiso and Ignazio Visco; Part I. Saving Trends, Government Deficit and Demographic Changes: 1. Why is Italy's saving rate so high? Luigi Guiso, Tullio Jappelli and Daniele Terlizzese; 2. Private saving and the government deficit in Italy Nicola Rossi and Ignazio Visco; 3. Do demographic changes explain the decline in the saving rate of Italian households? Luigi Cannari; 4. Generational accounting. The case of Italy Daniele Franco, Jagadeesh Gokhale, Luigi Guiso, Laurence J. Kotlikoff and Nicola Sartor; Part II. Life-Cycle Saving and Precautionary Motives: 5. Young households' saving and the life cycle of opportunities. Evidence from Japan and Italy Albert Ando, Luigi Guiso and Daniele Terlizzese; 6. Dissaving by the elderly, transfer motives and liquidity constraints Albert Ando, Luigi Guiso and Daniele Terlizzese; 7. Earnings uncertainty and precautionary saving Luigi Guiso, Tullio Jappelli and Daniele Terlizzese; 8. Risk sharing and precautionary saving Luigo Guiso and Tullio Japelli; Part III. Borrowing Constraints, Intergenerational Transfers and Bequests: 9. Saving and borrowing constraints Livio Maccan, Nicola Rossi and Ignazio Visco; 10. Durables and non-durables consumption: evidence from Italian household data Agar Brugiavini and Guglielmo Weber; 11. Intergenerational transfers and capital market imperfections. Evidence from a cross-section of Italian households Luigi Guiso and Tullio Jappelli; 12. Bequests and saving for retirement. What impels the accumulation of wealth? Fabrizio Barca, Luigi Cannari and Luigi Guiso; Methodological appendix: the bank of Italy's survey of household income and wealth Andrea Brandolini and Luigi Cannari; Statistical appendix; Index.