Introduction

The saving behavior of a society reveals much about the nature of its economy and demography. It reflects values, institutions, and incentives, as well as the rate of economic growth and the age structure of the population. The saving rate is a fundamental reflection of the relative values placed on the future and the present by its citizens and political institutions.

Saving is important for two related, but conceptually different, reasons. First, saving provides funds to finance investment, which in turn increases productivity and the future standard of living. Second, saving provides the vehicle by which households shift their income over their lifetimes, for example, from peak earning years to years of retirement, and, perhaps to a lesser extent, between generations by bequests.

It is not surprising that much attention has been paid to the apparent tremendous difference in saving rates in the United States and Japan. The United States for many decades has had the lowest traditionally measured saving rate of any advanced economy in the world, and that saving rate has plummeted in recent years. Japan, on the other hand, has had the highest saving rate among the advanced economies, although it, too, probably has fallen somewhat. In 1983, the net national saving rate as a percentage of gross domestic product (GDP) was 2.2% in the United States compared with 15.7% for Japan. Most of the other advanced Western economies had net national saving rates ranging from 7% to 10%.