It is commonly accepted in economic circles that a country can grow faster by making key investments in sectors such as technology and in R&D and human or physical capital.
But can a country also grow by saving more?
A recent working paper finds a strong relationship between the two, particularly in developing, technology-poor countries. Harvard Business School professor Diego Comin teamed with Harvard University's Philippe Aghion and Brown University's Peter Howitt to research the issue and write the working paper "When Does Domestic Savings Matter for Economic Growth?".
The paper concludes that savings contributes to growth in locations where entrepreneurs and companies lack access to necessary technological advances, in countries far away from the "technological frontier." To overcome this obstacle companies must lure foreign investors who posses the technology expertise they need. And thus the link to savings—to attract an investor, companies must put collateral into the project: money from savings. With access to technology, the company improves its productivity and contributes to growth of the developing country.
The research group's study of far-from-frontier countries shows that a 10 percent increase in the savings rate over the previous 10 years leads to an increase in the average growth rate over the next 10 years of 1.3 percent.

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