In this paper, it is argued that shadow activities and diﬀerent levels of marketization of household production systematically distort international comparisons of aggregate gross household saving rates (HSR): Higher shares of hidden income increase observed HSR. Cross-sectional data for eighteen (twenty-four) countries covering a period of a decade show that gross HSR are positively related to the degree of corruption (used as a proxy of the propensity to shift economic activities into the shadow) and to the share of income from property and self-employment. They are negatively related to the female employment rate, the ratio of indirect taxes to direct taxes and to the tax wedge. A plausible story behind these phenomena might be that unobserved consumption and 'wages' in the black labor market induce an upward bias of observed HSR and proﬁt shares, while the price level eﬀects of a higher share of indirect taxes and a 'welfare state' eﬀect lower observed HSR. As expected, the female employment rate (used as an indicator of marketization) is negatively related to household saving rates.
|Publication status||Published - 1 Nov 2009|
Austrian Classification of Fields of Science and Technology (ÖFOS)
- 502001 Labour market policy