Saving, Economic Growth, and Demographic Change

Abstract

How important is a high rate of savings to rapid economic growth and how does rapid economic growth affect efforts to raise the rate of savings? These are highly important issues to a debtor company trying to reduce its foreign debt. Study has shown that a higher national savings rate is an important macroeconomic goal in the developing world. Using the models of Japan and the U.S. it is apparent how a higher national rate of savings and investment leads to greater economic growth. Reduced fertility and a slowed population growth have lead to higher rates of saving. Surveys from industrialized countries and both Latin American and Asian countries indicate that when there are fewer children in a household there is less consumption and more savings. However slower population growth may have a reverse effect in other countries. 2 other studies have shown that households with fewer children have higher rates of consumption. This is most likely to occur in countries where there is slow or non-existent economic growth. The relationship between the number of children in a household and the impact on savings needs to be fully explored and tested. In addition the relationship between demographic factors and savings in developing countries is dependent upon the development of better models and the retrieval of improved data. A final conclusion observes that successful family planning can lead to an increase in family savings.

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