Saving Rates in Latin America: A Neoclassical Perspective

Latin American countries have long exhibited low levels of saving rates when compared to other countries in relatively similar stages of economic development (e.g., Asian economies). Motivated by this fact, we examine some of... [ view full abstract ]

Latin American countries have long exhibited low levels of saving rates when compared to other countries in relatively similar stages of economic development (e.g., Asian economies). Motivated by this fact, we examine some of the forces that lie behind the behavior of the saving rate in several Latin American countries through the lens of the neoclassical growth model. Our findings indicate that two factors, the TFP growth and fiscal policy (via tax rates and government expenditure), are capable of accounting for some of the major changes in the time path of the saving rates. However, through the lens of the model, differences in the TFP growth rates between Asian and Latin American countries alone cannot account for all the differences in their saving rates.