>From: barney[atx]green.gifu-u.ac.jp (James Barney Marsh)

>Point well taken; however, much of the factual data used in these debates
revolve around the level of financial saving. House buying is relegated to a
separate category and listed separately in the data tables. It has been pointed
out that more US families buy houses than Japanese and that, therefore,
financial saving plus houses purchased may be a fairer way of comparing the
savings quantities.

I agree that household purchases should be considered savings (although not an explanation for savings rates). I also agree that the differences in savings are probably not as large as previously thought. I received a private e-mail which notified me of a paper by David Campbell. I was told that according to his paper, savings rates in the US and Japan were about the same. I wondered how he would explain the current account deficit the US has with Japan with identical household savings rates. I know that the current account defecit is also influenced by government and business savings, but from papers such as "Are Government Bonds Net Wealth?" by Robert Barro, we know there are possible links between government spending and household savings.

>------------------------
>Anil Khosla
>From: khosla[atx]tcjk03.leidenuniv.nl

>Habit formation, as far as it is related to consumption patterns, is no doubt
one of the important factors in terms of explaining the high savings rate,
specially in the high growth period. But as far as its relation with growth is
concerned, it may be difficult to decipher the "chicken-and-egg" problem. There
definitely is a two way relationship. It may be true that in some countries,
despite high savings rate, growth may be moderate. Case of India during the
1960s and 1970s is an example. Despite reaching around 20%, the savings rate did
not result in high rate of growth. At the same time, it cannot be used as an
example to sustain Miyake's contention that high rate of growth leads to high
savings due to slow adjustment of consumption.

>High savings rate, in order to impinge on the rate of economic growth, has to
be integrated with efficient (whatever that term may connote) allocation of
these savings through capital markets. But once growth takes root, it is quite
possible that increase in consumption falls behind the rise in incomes leading
to high savings.

>I also have not come across any cause and effect studies and would be
interested to hear if there are any around related to Japan or any other
country.

There are two issues here. The first deals with the higher savings-->higher investment-->higher output through capital accumulation links. The second deals with the response of savings to exogenous shocks to productivity (i.e. those not attributable to the accumlation of factors of production such as labor and capital).

>-----------------
>From: "James A. Kilpatrick"

>With regard to the relationship between income growth and the rate of saving,
the literature on saving generally says it depends somewhat on expectations. If
households expect income to rise, they will tend to save less. If they are
surprised each year as their incomes increase, they may save more (I suspect
this may have happened in Japan until the 60sor so).

This is the Permanent Income theory by Milton Friedman used in the study of
consumption. The habit-formation model, however, would predict different savings
behavior if a perceived permanent shock to income occurs. ----------
>From: sja[atx]glocom.ac.jp (Stephen J. Anderson)

>Public policy is an exogenous variable that goes far to explain high savings
rates. I made the argument in the _Journal of Japanese Studies_, Vol. 16, No. 2,
Winter 1990 in an article entitled "The Political Economy of Japanese Saving:
How Postal Savings and Public Pensions Support High Rates of Household Saving in
Japan." Kent Calder also had a piece in the same issue on the institutional
reasons that support the postal savings system.

I agreee that the government may influence savings rates. The important question, however, is if this can lead to higher economic growth. In many models, an increase in the savings rate leads to a one-time gain, but not lasting growth. Also, the government cannot continuously encourage higher and higher savings rates as there is an upper bound of 100%.

For example, suppose education not savings is the engine of growth. Without any government involvment, people who tend to save more will also tend to get more education. Again, both involve sacrificing potential current consumption for greater future returns. In this case if savings is encouraged but education is not, then growth will not occur (again, assuming that education is the engine of growth).

Anthony Miyake