We examine the relationship between income growth and saving using both cross-country and household data. At the aggregate level, we find that growth Granger causes saving, but that saving does not Granger cause growth. Using household data, we find that households with predictably higher income...

This paper argues that the versions of both permanent income and life-cycle theories which have recently become fashionable are inconsistent with the grossest features of cross-country and cross-section data on consumption and income. There is clear evidence that consumption and income growth...