A Comparison of Personal Sector Saving Rates in the UK, US and Italy

We develop the approach of Gokhale, Kotlikoff and Sabelhaus (1996), based on the life-cycle model of savings, to decompose the large differences in the personal sector saving rates between the UK,US and Italy. Our work suggests that the US saving rate is lower principally because Americans on average retire later. The Italian saving rate is high predominantly because Italians are unable to borrow, especially when they are young. We also found that demography and the different tax and benefit systems are able to explain little of the cross-sectional differences in saving rates.

The study estimates the size of, and accounts for the possible importance of, intergenerational private transfers in determining saving rates.