Working Paper: NBER ID: w1351
Authors: Lawrence H. Summers
Abstract: This paper reviews theoretical argumrents and empirical evidence regarding the interest elasticity of savings. It concludes that there are strong theoretical reasons to expect an increase in after tax rates of return to increase private savings. Moreover, the empirical rrethods used in most previous studies are likely to produce underestimates of the interestelasticity of savings. New evidence based on direct estimation of utility function parameters suggests that savings are likely to be highly interest elastic. The paper concludes by noting that too little time has passed to evaluate the effects of the savings incentives contained in recent tax legislation.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| after-tax rate of return (H24) | private savings (D14) |
| after-tax rate of return (H24) | long-run capital accumulation (E22) |
| interest elasticity of savings (E21) | private savings (D14) |
| after-tax rate of return (H24) | capital accumulation (E22) |
| altruistic bequests (D64) | savings elasticity (D12) |