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Personal and Corporate Saving in South Africa

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Author Info
Aron, Janine
Muellbauer, John

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Abstract

Low domestic saving rates in South Africa may perpetuate a low-growth trap. The decline in government saving, a major reason for the overall decline in saving, is now being reversed. However, personal saving rates have fallen since 1993, and corporate rates since 1995, and both may decline further with lower real interest rates. It is important to understand both personal and corporate saving behaviour in order to formulate policies to raise the domestic saving rate in line with the needs of economic growth. This article summarizes our previous work on the household sector, emphasizing the role of financial liberalization, assets, and income expectations, and it explains sectoral links and policy implications. Further, it analyses South Africa's corporate saving rate in detail. Models are developed both for the share of profits in national income, including the roles of the terms of trade, tax effects, and the price to unit labour cost margin, and for the share of corporate saving in profits, which is found to depend on inflation, the real interest rate, dividend taxation, and financial liberalization. Corporate saving is remarkably underresearched, given its importance in many economies. This research thus puts the saving and growth concerns of Kaldor into a modern empirical context.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2656.

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Date of creation: Dec 2000
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Handle: RePEc:cpr:ceprdp:2656

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Related research
Keywords: Corporate Pay Out Policy; Corporate Profit Share; Corporate Saving; Fiscal And Monetary Policy; Personal Saving;

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May. [Downloadable!] (restricted)
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  3. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  4. Hubbard, R Glenn & Skinner, Jonathan S, 1996. "Assessing the Effectiveness of Saving Incentives," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 73-90, Fall. [Downloadable!] (restricted)
    Other versions:
  5. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Oriana Bandiera & Gerard Caprio & Patrick Honohan & Fabio Schiantarelli, 2000. "Does Financial Reform Raise or Reduce Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 239-263, May. [Downloadable!] (restricted)
    Other versions:
  7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
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  9. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  10. James M. Poterba, 1987. "Tax Policy and Corporate Saving," Working papers 470, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  11. Sarno, Lucio & Taylor, Mark P., 1998. "Real Interest Rates, Liquidity Constraints and Financial Deregulation: Private Consumption Behavior in the U.K," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 221-242, April. [Downloadable!] (restricted)
    Other versions:
  12. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March. [Downloadable!] (restricted)
    Other versions:
  13. David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-49, Part I, M. [Downloadable!] (restricted)
  14. Bayoumi, Tamim A, 1993. "Financial Deregulation and Consumption in the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 536-39, August. [Downloadable!] (restricted)
  15. repec:fth:harver:1435 is not listed on IDEAS
  16. Steve Bond & Lucy Chennells & Michael Devereux, 1995. "Company dividends and taxes in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 16(3), pages 1-18, August. [Downloadable!]
  17. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February. [Downloadable!] (restricted)
    Other versions:
  18. Muellbauer, J. & Aron, J., 1999. "Estimates of Personal Sector Wealth for South Africa," Working Papers Series 99-17, Centre for the Study of African Economies, University of Oxford.
    Other versions:
  19. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December. [Downloadable!] (restricted)
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  21. Schmidt-Hebbel, K. & Serven, L., 1997. "Saving Across the World: Puzzles and Policies," World Bank - Discussion Papers 354, World Bank.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Herman Bennett & Norman Loayza & Klaus Schmidt-Heb, 2000. "Un Estudio del Ahorro Agregado por Agentes Económicos en Chile," Working Papers Central Bank of Chile 85, Central Bank of Chile. [Downloadable!]
  2. Janine Aron & John Muellbauer & Coen Pretorius, 2004. "A Framework for Forecasting the Components of the Consumer Price," Development and Comp Systems 0409054, EconWPA. [Downloadable!]
  3. Aron, Janine & Muellbauer, John, 2006. "Review of Monetary Policy in South Africa: 1994-2004," CEPR Discussion Papers 5831, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Luc Eyraud, 2009. "Why Isn't South Africa Growing Faster? A Comparative Approach," IMF Working Papers 09/25, International Monetary Fund. [Downloadable!]
  5. Kivilcim Metin Ozcan & Asli Gunay & Seda Ertac, 2003. "Determinants of private savings behaviour in Turkey," Applied Economics, Taylor and Francis Journals, vol. 35(12), pages 1405-1416, August. [Downloadable!] (restricted)
  6. John N. Muellbauer, 2007. "Housing, credit and consumer expenditure," Proceedings, Federal Reserve Bank of Kansas City, pages 267- 334. [Downloadable!]
    Other versions:
  7. Janine Aron & John Muellbauer, 2000. "Estimating Monetary Policy Rules for South Africa," Working Papers Central Bank of Chile 89, Central Bank of Chile. [Downloadable!]
    Other versions:
  8. Aron, Janine & Muellbauer, John & Prinsloo, Johan, 2006. "Estimating the Balance Sheet of the Personal Sector in an Emerging Market Country: South Africa 1975-2003," Working Papers RP2006/99, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  9. Kivilcim Metin-Ozcan, 2002. "Determinants of Private Saving Behaviour in Turkey," Departmental Working Papers 0206, Bilkent University, Department of Economics. [Downloadable!]
  10. Vasco C Nhabinde & Niek J Schoeman, 2008. "The Impact of Retirement Benefits on Consumption and Saving in South Africa," Working Papers 200807, University of Pretoria, Department of Economics. [Downloadable!]
  11. Janine Aron & John Muellbauer & Benjamin Smit, 2004. "A Structural Model of the Inflation Process in South Africa," Development and Comp Systems 0409055, EconWPA. [Downloadable!]
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