The first essay in this thesis quantitatively investigates the extent to which demography can explain the large differences in cross-country savings rates. Fertility and adult survival rates are incorporated into an overlapping generations model. High fertility rates increase the expenditure burden of children and lower savings, while high adult survival rates induce individuals to discount the future less heavily and consequently encourage savings. The two demographic factors can explain up to 68% of the dispersion in the cross-country savings rates. Furthermore, if the expenditure burden is sufficiently low, adult survival rates have a greater impact on cross-country savings rates differences than fertility rates do. Conversely, if the expenditure burden is sufficiently high, fertility rates have a greater impact. The model developed is also satisfactory in explaining the large gap in savings rates between the richest and the poorest countries.;The second essay demonstrates that tax reform affects the growth rate non-negligibly, which is different from the well-established evidence from the US data. To examine the effects of tax reform on growth rate and human capital accumulation, I use the standard endogenous growth model along the lines of Lucas (1990) and introduce privately financed education into the model to capture the notion that education is costly. Using parameters calibrated to match the features of the Indonesian economy, reducing the capital income tax rate to zero can increase the growth rate by 8 to 14 percent. While private spending on education changes considerably in response to changes in both tax rate and public spending on education, learning time remains relatively constant. Results also show that the growth effects of changes in public spending on education are stronger than those of taxation. A further investigation using the Malaysian and Japanese data produces almost similar results as those obtained using the Indonesian data.
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