The Determinants of Savings: Lessons from Italy

In most of the postwar period Italy featured an abnormally high saving rate, compared to most other industrialized countries. But this is no longer true. Under any definition, in the last decade the Italian saving rate has fallen below the average of the developed economies. Why was the Italian saving ratio comparatively high and why has its decline been so dramatic? In this paper we consider various potential answers to these questions. We particularly focus on the recent slowdown in productivity growth, the development of credit and insurance markets, and the changes in the social security system. In the second part of the paper we use a series of repeated cross-sections from the Survey of Household Income and Wealth in order to check if the macroeconomic explanation for the decline in saving are consistent with microeconomic data.