Introduction

According to official sources, aggregate Italian saving rates have declined substantially in recent years. The precise timing and extent of this change largely depend on the definition of saving adopted and on the researcher's attitude toward the host of measurement issues involved. However, major trends are undisputably under way with regard to gross and net rates, national and private measures and “adjusted” and “unadjusted” values, and provide a rather surprising description of the behavior of Italian consumers.

In the second half of the eighties private saving rates (net of depreciation, adjusted for durables and inflation and computed as ratios to net national disposable income) fluctuated around 14 percent, 5 percentage points lower than the average in the sixties. In the same years government saving (adjusted for inflation) plunged to an unprecedented minus 1 percent, after more than thirty years of current account surpluses averaging 3 percent. As a result, the overall Italian saving rate is 9 percentage points lower today than during the so–called “Italian economic miracle”.

Several alternative explanations for the fall in the saving rate have been put forward in recent research. In particular, the impact of fiscal policy on private sector behavior has been repeatedly scrutinized, although no definite conclusion has been drawn. Nevertheless, this paper proposes that a thorough assessment of the interplay of private and public decisions can shed light on the evolution of the saving rate in recent decades.