Measuring and interpreting household saving rate

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Measuring and interpreting household saving rate

• Cédric Audenis
• Stéphane Gregoir
• Claudie Louvot

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Informational contents of the saving rate
unconsumed fraction of income derived from
gross (or net) production and capital

• Short term
• Countrys capacity to cope with a cyclical
  downturn
• Saving for rainy days (health problems,
  unemployment,)

• Long term
• Countrys capacity to finance itself
• Saving for retirement

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Objectives

• Looking for a meaningful and internationally
  comparable measures of household saving rate
• No information on the absolute level
• Not necessarily the measure adapted to
  econometric modellings

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For a more comparable measure6 issues

• Various institutions
• The relative size of individually identifiable
  consumption
• The existence of pension funds
• The relative share of indirect taxes
• Measurement and conceptual issues
• The measurement of FCC
• Accounting for holding gains
• Durable goods consumption

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A measure that can be constructed today (I)

• Various institutions more socialised economies
  have larger  standard  saving rate

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A common measure that can be constructed today
(II)

• Statistical treatment of the voluntary saving for
  retirement
• Pension funds public pension schemes (SNA93)
• Various definitions Pension funds life
  insurance

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Possible improvements capital depreciation

• Need of net saving rate BUT
• Statistical measure of capital depreciation
• Difficult to measure housing service of
  constant quality
• Harmonization in progress

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Possible improvements indirect taxes

• Heterogeneity in the structure of taxes ceteris
  paribus, a larger share of indirect taxes on
  consumption implied a lower saving rate
• Indirect taxes deducted from disposable income,
  indirect taxes deducted from consumption
• Saving reduce by indirect taxes levied on
  investment
• Ambiguous impact on the saving rate

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Topics that merit closer examination capital
gains

• How to deal with capital gains ?
•  realised  and  unrealised  capital gains
• Measurement problem quoted/unquoted shares and
  their relative share in household portfolio
• Only capital gains realised vis-à-vis another
  sector might be considered as household income
  and possibly saving.
• Taxes levied on capital gains indirect and very
  rough

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Topics that merit closer examination durable
goods

• For some durable goods consumption is close to
  investment decision
• In terms of agent behaviour
• Measurement issue resource income related to
  the production of durable-goods-related services,
  use user cost of durable goods
• Different public utilities may lead to different
  durable goods consumption

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Conclusion
Impact of Change in French saving rate
Adjusted income -3 ?
FCC -5.5 ?
Indirect taxes 1.7 ?
Pension funds 0 ?
Durable goods 6.3 ?
Capital gains 4.5 ?