Cross-Country Private Saving Heterogeneity and Culture
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Cross-Country Private Saving Heterogeneity and Culture M. de Castro Campos · C. Kool · J. Muysken
Published online: 28 March 2013 © Springer Science+Business Media New York 2013
Abstract Motivated by the dominant role of cross-country heterogeneity in private saving in the creation of Eurozone imbalances over the past decade, we empirically investigate the determinants of private saving for a sample of 30 OECD countries over the period 1990–2010. In addition to standard macroeconomic variables, we include three country-specific cultural indicators, derived from the World and European Value Surveys. We find these three variables—thrift, trust and religiosity—to significantly contribute to the explanation of cross country saving heterogeneity both for the OECD group at large and for the Eurozone countries separately. Keywords
Culture · Institutions · Current account · Eurozone imbalances
JEL Classification
O47 · O30 · D24 · C24
1 Introduction The introduction of the euro in 1999 was assumed to lead to macroeconomic convergence between the countries participating in the eurozone. In practice, imbalances between euro area countries have systematically grown in the first decade of the euro’s
M. de Castro Campos (B)· C. Kool Utrecht School of Economics, Utrecht University, Kriekenpitplein 21-22, 3584 TC Utrecht, The Netherlands e-mail: [email protected] C. Kool e-mail: [email protected] J. Muysken Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands e-mail: [email protected]
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existence. Holinski et al. (2012) and Jaumotte and Sodsriwiboon (2010) empirically document divergent developments in competitiveness as well as emergence of large accumulated current account surpluses in the Northern part of the eurozone and deficits in the Southern part. In addition, these authors show that persistent current account imbalances within the eurozone are primarily due to cross-country heterogeneity in gross private saving. In this paper, we empirically investigate the determinants of cross-country saving to shed more light on the heterogeneity between countries in general and between eurozone countries in particular. In addition to the macroeconomic explanatory variables that are typically used in the literature, we add a few institutional and cultural variables as potential drivers of cross-country differences. It turns out that these variables have a significant impact in explaining the cross-country heterogeneity. The macroeconomic determinants of private saving have been extensively studied in the past. Examples are Schmidt-Hebbel et al. (1992) and Edwards (1996), who focus on developing countries and on Latin America, respectively. Masson et al. (1998), Hussein and Thirlwall (1999) and Loayza et al. (2000), include both industrial and developing countries. Finally Kessler et al. (1993), Haque et al. (1999), De Serres and Pelgrin (2002) and Ramajo et al. (2006) study the OECD countries, whereas Hondroyiannis (2006) exclusively take European countr
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