IDEAS home Printed from
   My bibliography  Save this article

Enduring Virtues: Saving and Investing as National Priorities in 2017


  • William B.P. Robson

    (C.D. Howe Institute)


Canada’s 150th anniversary is an apt time to reflect on past progress and how to build on it. A key lesson from our own history and global experience is that faster-growing economies have higher saving and investment. Forgoing consumption today adds to wealth: resources for the housing, capital, infrastructure and investments abroad that boost living standards tomorrow. But Canadians’ recent national saving – as households, as owners of businesses, and through our governments – has been feeble. Over the year to the third quarter of 2016, we consumed 98 percent of national disposable income. Our national saving rate was 2 percent, way below an average above 7 percent since the mid-1990s. The problem was not so much our individual behaviour: households saved almost $1,700 per person. But losses by businesses – and, more important, governments running deficits – reduced national saving to barely $900 per Canadian. Such weak saving meant that, to finance net investment that totaled $3,200 per Canadian, we had to borrow more than $2,300 per Canadian abroad. Not necessarily bad – but about $2,800 of that investment was in housing. Capital spending by businesses and governments – projects likelier to improve our capacity to export and service foreign debt – barely exceeded depreciation. Sagging national saving has its counterpart in a virtual flat-lining of national net worth. While some of this weakness is cyclical, we would be rash to count on surging world demand and higher commodity prices to pull us ahead. Our saving as households may look respectable, but with so much of our wealth in housing, and a subdued outlook for returns on financial assets, more would be better. Business profits will rebound, but to get corporate saving back to historical levels, we need greater efficiency. Policy can help private-sector saving: governments should be relying more on consumption taxes and treat household saving more generously, and reduce taxes that raise business’ costs and lower returns to investment. The top priority for governments, however, is fixing their own budgets. Much of what governments call “investment” is transfer payments and consumption. Federal capital spending does not even match depreciation: Ottawa’s net investment is negative. And notwithstanding the rhetoric, deficits have nothing to do with investment. Capital spending creates assets, not liabilities. When governments run deficits, consuming more than tax revenue net of transfers and interest payments can cover, their deficits erode national net worth – as they are doing now. We need less focus on near-term GDP and boosting consumption. Higher saving and investment, as households, through businesses and Canadian governments, is our surest path to a more prosperous future.

Suggested Citation

  • William B.P. Robson, 2017. "Enduring Virtues: Saving and Investing as National Priorities in 2017," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 467, January.
  • Handle: RePEc:cdh:commen:467

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Cavallo, Eduardo A. & Pedemonte, Mathieu, 2015. "What is the Relationship between National Saving and Investment in Latin America and the Caribbean?," IDB Publications (Working Papers) 7204, Inter-American Development Bank.
    2. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
    3. Eduardo Cavallo & Mathieu Pedemonte, 2016. "The Relationship between National Saving and Investment in Latin America and the Caribbean," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 29-53, April.
    4. Philip Bazel & Jack Mintz, 2016. "2015 Tax-Competitveness Report: Canada is losing its Attractiveness," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 9(37), November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duy-Tung Bui, 2018. "Fiscal policy and national saving in emerging Asia: challenge or opportunity?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 305-322, August.
    2. Mariam Camarero & Juan Sapena & Cecilio Tamarit, 2020. "Modelling Time-Varying Parameters in Panel Data State-Space Frameworks: An Application to the Feldstein–Horioka Puzzle," Computational Economics, Springer;Society for Computational Economics, vol. 56(1), pages 87-114, June.
    3. Francesca Iorio & Stefano Fachin, 2014. "Savings and investments in the OECD: a panel cointegration study with a new bootstrap test," Empirical Economics, Springer, vol. 46(4), pages 1271-1300, June.
    4. Nagayasu, Jun, 2012. "The threshold consumption correlation-based approach to international capital mobility: Evidence from advanced and developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 256-263.
    5. Rustam Jamilov, 2013. "J-Curve Dynamics and the Marshall–Lerner Condition: Evidence from Azerbaijan," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(3), pages 313-323, February.
    6. C. P. Barros & Luis A. Gil-Alana, 2015. "Investment and saving in Angola and the Feldstein-Horioka puzzle," Applied Economics, Taylor & Francis Journals, vol. 47(44), pages 4793-4800, March.
    7. repec:dpr:wpaper:0888 is not listed on IDEAS
    8. Charles Yuji Horioka & Nicholas Ford, 2017. "The Solution to the Feldstein-Horioka Puzzle," ISER Discussion Paper 1016, Institute of Social and Economic Research, Osaka University.
    9. Charles Yuji Horioka & Takaaki Nomoto & Akiko Terada-Hagiwara, 2013. "Why has Japan’s Massive Government Debt Not Wreaked Havoc (Yet)?," UP School of Economics Discussion Papers 201310, University of the Philippines School of Economics.
    10. Sebastián Fleitas & Andrés Rius & Carolina Román & Henry Willebald, 2013. "Contract enforcement, investment and growth in Uruguay since 1870," Documentos de Trabajo (working papers) 13-01, Instituto de Economia - IECON.
    11. Jack Mintz & Philip Bazel, 2020. "The 2019 Tax Competitiveness Report: Canada’s Investment and Growth Challenge," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 13(1), March.
    12. Horioka, Charles Yuji & Terada-Hagiwara, Akiko, 2012. "The determinants and long-term projections of saving rates in Developing Asia," Japan and the World Economy, Elsevier, vol. 24(2), pages 128-137.
    13. Dilem Yıldırım & Onur A. Koska, 2018. "Puzzling out the Feldstein-Horioka Paradox for Turkey by a Time-Varying Parameter Approach," ERC Working Papers 1808, ERC - Economic Research Center, Middle East Technical University, revised Apr 2018.
    14. Mark J. Holmes & Jesús Otero, 2016. "A pairwise-based approach to examining the Feldstein–Horioka condition of international capital mobility," Empirical Economics, Springer, vol. 50(2), pages 279-297, March.
    15. Nagayasu, Jun, 2010. "Domestic Capital Mobility: A Panel Data Approach," MPRA Paper 27720, University Library of Munich, Germany.
    16. Waisman, Henri & Rozenberg, Julie & Hourcade, Jean Charles, 2013. "Monetary compensations in climate policy through the lens of a general equilibrium assessment: The case of oil-exporting countries," Energy Policy, Elsevier, vol. 63(C), pages 951-961.
    17. Ketenci, Natalya, 2012. "The Feldstein–Horioka Puzzle and structural breaks: Evidence from EU members," Economic Modelling, Elsevier, vol. 29(2), pages 262-270.
    18. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Testing the validity of the Feldstein--Horioka puzzle for Australia," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 599-605, February.
    19. repec:dpr:wpaper:0905 is not listed on IDEAS
    20. Jamilov, Rustam, 2012. "Capital mobility in the Caucasus," MPRA Paper 38184, University Library of Munich, Germany, revised Apr 2012.
    21. Rao, B. Bhaskara & Tamazian, Artur & Kumar, Saten, 2010. "Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks," Economic Modelling, Elsevier, vol. 27(5), pages 1269-1273, September.
    22. Eduardo A. Cavallo & Mathieu Pedemonte, 2015. "What is the Relationship between National Saving and Investment in Latin America and the Caribbean?," IDB Publications (Working Papers) 90996, Inter-American Development Bank.

    More about this item


    Fiscal and Tax Policy;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdh:commen:467. See general 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: (Kristine Gray). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.