The Impact of Retirement Benefits on Consumption and Saving in South Africa
AbstractIn this paper we empirically analyse the impact of retirement benefits on consumption and personal saving in South Africa using the Feldstein 1974 specification and procedure. By using a basic extended Ando-Modigliani life cycle model we show that the introduction of retirement programs crowds out discretionary household saving and consumption of contributors to such programs. There against, benefits paid by these programs contribute positively to consumption with a concomitant decline in the national pool of savings. However, taxes on retirement benefits affect the discounted value thereof and any change in such tax policy would therefore affect the saving behaviour of contributors in the opposite direction of the tax policy. We use time series data on consumption per capita, disposable labour-income per capita and pension and benefit payments from provident funds both public and privately managed. Using OLS, we find that estimates of retirement benefits are robust when regressed with the per capita government deficit and per capita durable consumption. The estimates are also stable when regressed with the full Barro specification (which includes the per capita government deficit, per capita durable consumption expenditure and the product of unemployment and per capita disposable income).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 69.
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Newlands on Main, F0301 3rd Floor Mariendahl House, cnr Campground and Main Rds, Claremont, 7700 Cape Town
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Other versions of this item:
- 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.
- H - Public Economics
- H5 - Public Economics - - National Government Expenditures and Related Policies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yoemna Mosaval).
If references are entirely missing, you can add them using this form.