Household saving is still little understood, and even the basic facts – for instance: How does saving change over the life cycle? Does saving turn negative in old age? – are controversial. Understanding saving behavior is not only an important question of economic theory because the division of income in consumption and saving concerns one of the most fundamental household decisions, but it is also of utmost policy relevance. One reason is that private household saving as a private insurance interacts with social policy as public insurance. Population ageing and its threat to the sustainability of the public insurance systems have put the spotlight back on own saving as a device for old-age provision. Solving the pension crises therefore requires understanding saving. Another reason is growth: capital accumulation through saving increases economic growth directly, and indirectly through changes in labor productivity. The topic of household savings is by no means uncharted territory. Recent comprehensive surveys of the work on saving include Deaton (1992), Browning and Lusardi (1996), and Attanasio (1999). These surveys illustrate the many challenges the theory faces in matching the empirical facts about saving as well as the need to use micro data to understand saving behavior. 1 The authors would like to thank Al Gustman, Stefan Hoderlein, Anette Reil-Held, Jon Skinner, and Joachim Winter for suggestions and comments. Mathias Sommer provided very able research assistance. We received financial support from the Deutsche Forschungsgemeinschaft (Sonderforschungsbereich 505) and the European Commission (TMR contract no. ERBFMRXCT960016). The first author very much enjoyed the hospitality of Dartmouth College when writing this article. 2 Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim, Germany, and National Bureau of Economic Research (NBER), Cambridge, Mass., USA. This volume adds a distinctive international dimension to these studies of saving. It presents the results of the "International Savings Comparison Project" – a project performed under the auspices of a European Union sponsored network of researchers.4 The main focus of this project is the interaction of household saving with public policy, notably the generosity of public pension systems. In this sense, our work is very much in the tradition of Feldstein’s (1974) seminal study. However, we transpose the inference from time series data to a set of international panel data drawn from six country studies. These studies analyze household saving in four European countries – Germany, Italy, the Netherlands and the United Kingdom – and in Japan and the United States.
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