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Personal and corporate saving in South Africa

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  • Janine Aron
  • John Muellbauer

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 behavior in order to formulate policies to raise the domestic saving rate in line with the needs of economic growth. This article summarizes previous work on the household sector, emphasizing the role of financial liberalization, assets, and income expectations, and explains sectoral links and policy implications. Further, it analyzes 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 labor cost ratio, 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 under-researched, given its importance in many economies. This research thus puts the saving and growth concerns of Kaldor into a modern empirical context. Copyright The Author 2000. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.
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Suggested Citation

  • Janine Aron & John Muellbauer, 2000. "Personal and corporate saving in South Africa," CSAE Working Paper Series 2000-21, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2000-21
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - 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; Modern Monetary Theory
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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