Savings and early economic growth in the United States and Japan

The period of early economic growth in both the United States (the antebell um period) and Japan (the Meiji period) was marked by a pronounced rise in the rates of domestic saving and investment. This paper decomposes the obse rved changes in saving/investment rates and shows that substantial componen ts-about two-thirds in US and more than one-third in Japan-were due to unex plained shifts in the saving function. In turn we argue that an important f actor behind the exogenous shift in savings and hence behind the rise in th e net investment rate was the increased degree of financial intermediation in each country. (C) 1999 Elsevier Science B.V. All rights reserved.