DP203 Savings Behaviour, Fertility and Economic Development in Nineteenth Century Britain and America

Author(s): Paul A Johnson
Publication Date: November 1987
Keyword(s): Britain, Life-Cycle Saving, Liquidity Constraints, Nineteenth Century, Pension Systems, United States
JEL(s): 042, 044, 841, 918, 921
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=203

This paper reviews evidence that life-cycle saving became the norm in nineteenth-century America, with a consequent fall in fertility and rise in the rate of capital formation, and considers whether a similar transition to life-cycle saving can be observed in nineteenth-century Britain. Although there is extensive evidence of widespread saving by British workers, most of this saving did not fit a life-cycle pattern. Liquidity constraints forced British workers to borrow, buy on credit, save only for short-run ends, and abstain from long-run accumulation. The paper concludes that some of the apparent difference between the savings behaviour of British and American workers may be the result of a misreading of United States evidence, some may be due to differences in old-age welfare systems, but that the most plausible explanation is that the real income of British workers in this period was substantially below that of their American counterparts.