International Comparisons of Household Saving Rates and Unobservable Income

Description

In this paper it is argued that international comparisons of aggregate household saving rates are systematically distorted by unobservable variables. Different levels of shadow activities and of marketization of household activities
are identified as the main culprits. Cross sectional data covering a period
of a decade show that household saving rates are negatively related to female employment rates (used as an indicator of marketization) while they are positively related to the degree of corruption (used as an indicator of the propensity to shift economic activities into the underground). Furthermore, the ratio of income from property and self employment to wages is positively related to household saving rates across countries. The explanation
for these closely related phenomena might be that unobserved ‘wages’
(equal to consumption) in the black labor market induce an upward bias of
observed household saving rates and profit shares, while productivity levels are biased downwards. In addition, the level of redistributive activities and unobserved human capital investment of households should be considered as relevant factors for systematic distortions.

Period	24 Oct 2008
Event title	Workshop OeNB: Saving in Austria - too little and too late?
Event type	Unknown
Degree of Recognition	National