Cross-national regressions indicate that higher fertility increases poverty both by retarding economic growth and by skewing distribution against the poor. A basic distinction is made between the determinants of the capacity to save and the willingness to save. The willingness to save is assumed to depend on financial variables such as the rate of interest, the level of financial deepening and inflation.
Inflation exerts a mild positive effect on saving but soon turns negative.
Total saving may also depend on tax effort, but a surprisingly strong negative relation is found between the ratio of tax revenue to GDP and the domestic savings ratio. This has led to extensive liberalisation of DFI regimes in many developing countries, including in Indonesia. The results show DFI to benefit locally-owned establishments, but the effect differs between groups of industries. Spillovers from DFI are found in sectors with a high degree of competition. Moreover, it seems that the larger the technology gap between domestic and foreign establishments, the larger the spillovers.