Savings and Nutrition at Low Incomes

Abstract

While many development theorists assume saving propensities vary among different groups, there has been limited theoretical justification for this view. This paper analyzes two complementary theories stressing the effect on saving of physiological consequences of poor nutrition at low incomes. One influence is on the probability of survival; another is on workers' productivity. Either effect means that the average propensity to save can rise with income. Issues considered include annuities, exogenous changes in survival and efficiency, implications for the efficiency wage theory of unemployment, and distinctions between wage and nonwage income. Implications of nutritional effects for econometric specification of saving functions are stressed.