Hostname: page-component-76fb5796d-dfsvx Total loading time: 0 Render date: 2024-04-28T16:41:59.741Z Has data issue: false hasContentIssue false
  • English
  • Français

Are We Saving Enough? The Macroeconomics of the Savings Gap

Published online by Cambridge University Press:  26 March 2020

Olga Pomerantz  and
Martin Weale
Olga Pomerantz*
Affiliation:
National Institute of Economic and Social Research
Martin Weale*
Affiliation:
National Institute of Economic and Social Research
*
e-mail: o.pomerantz@niesr.ac.uk
m.weale@niesr.ac.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

We assess the adequacy of saving in the United Kingdom from a macroeconomic perspective. We present conditions needed for wealth to grow in line with income and discuss the circumstances in which capital gains can represent a substitute for saving. We show that reference to balance sheets can be misleading because they fail to identify the cost of future consumption. A savings gap of between £16.5 bn and £66 bn is identified before taking account of the effects of demographic change. The outcome depends on whether one regards rising house prices as a consequence of fixed supplies of land or as the outcome of failing to invest enough in housing with the upper figure arising in the latter case. Policy measures to reduce the savings gap are discussed. These include appropriate use of fiscal policy and taxation of credit.

Keywords

Savings rateequilibrium growthfiscal deficit and national savingcapital gainsE21E60E62H6O40
Type
Articles
Information
National Institute Economic Review , Volume 191 , January 2005 , pp. 79 - 93
Copyright
Copyright © 2005 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to Ray Barrell for his comments.

References

Abel, A.B, Mankiw, N.G., Summers, L.H. and Zeckhauser, R.J. (1989), ‘Assessing dynamic efficiency: theory and evidence’, Review of Economic Studies, 56, pp 1–120.CrossRefGoogle Scholar
Arellano, M. and Bond, S. (1991), ‘Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations’, Review of Economic Studies, 58, pp. 277–297.CrossRefGoogle Scholar
Bank of England (2004), Inflation Report, August, pp. 8–9.Google Scholar
Barro, R. (1974), ‘Are government bonds net wealth’, Journal of Political Economy.CrossRefGoogle Scholar
Begg, I.G. and Weale, M.R. (1990), ‘Time for a tax on credit’, Financial Times, 20 November.Google Scholar
Cardarelli, R., Sefton, J. and Kotlikoff, L.J. (2000), ‘Generational accounting in the UK’, Economic Journal, 110, 467, pp. 547–574.CrossRefGoogle Scholar
Dasgupta, P. and Heal, G. M. (1974), ‘The optimal depletion of exhaustible resources’, Review of Economic Studies Symposium, 3–28.CrossRefGoogle Scholar
Dixit, A., Hammond, P. and Hoel, M. (1980), ‘On Hartwick's rule for regular maximin paths of capital accumulation and resource depletion’, Vol. 47, pp. 551–556.Google Scholar
Eisner, R. (1988), ‘Extended accounts for national income and product’, Journal of Economic Literature XXVI, pp. 1611–1684.Google Scholar
Feldstein, M. (1977), ‘Does the United States save too little?’, American Economic Review, 67, pp. 116–121.Google Scholar
Hartwick, J. (1977), ‘Intergenerational equity and the investing of rents from exhaustible resources’, American Economic Review, 67, pp. 972–974.Google Scholar
Treasury, H.M. (2004), Pre-budget Report, HMSO.Google Scholar
Hotelling, H. (1931), ‘The economics of exhaustible resources’, The Journal of Political Economy, 39(2), pp. 137–175.CrossRefGoogle Scholar
Meade, J.E. (1966), The Growing Economy, London, George Allen and Unwin.Google Scholar
Meade Committee (1978), The Structure and Reform of Direct Taxation, London, Allen and Unwin.Google Scholar
Mitchell, J.E. (2003), ‘Should we be surprised by the unreliability of real-time output gap estimates? Density estimates for the Euro Area’, National Institute Discussion Paper no. 255. www.niesr.ac.uk/pubs/dp2003.htm//dp255.Google Scholar
Nickell, S. (1981), ‘Biases in dynamic models with fixed effects’, Econometrica, 49, pp. 1417–1426.CrossRefGoogle Scholar
OECD (2004), ‘Savings behaviour and the effectiveness of fiscal policy’, Economic Outlook, Chapter 5.Google Scholar
Phelps, E.S. (1961), ‘The golden rule of capital accumulation: a fable for growthmen’, American Economic Review, 51, pp. 638–643.Google Scholar
Rowthorn, R. (1999), ‘Unemployment, wage bargaining and capital-labour substitution’, Cambridge Journal of Economics, 23, pp. 413–426.CrossRefGoogle Scholar
Salop, and Stiglitz, J. (1977), ‘Bargains and ripoffs: a model of monopolistically competitive price dispersion’, Review of Economic Studies, 44, pp. 493–510.Google Scholar
Sandler, R. (2002), Medium and Long-term Savings in the UK, HMSO, www.hm-treasury.gov.uk/documents/financial_services/savings/fin_sav_sand.cfmGoogle Scholar
Sefton, J.A. and Weale, M.R. (2004), ‘The concept of income in a general equilibrium’, National Institute Working Paper No 163.Google Scholar
Sefton, J.A. and Weale, M.R. (1996), ‘The net national product and exhaustible resources: the effects of foreign trade’, Journal of Public Economics, 61, pp. 21–47.CrossRefGoogle Scholar
Weale, M.R. (2004), ‘National saving and the Stability and Growth Pact’, Journal of Common Market Studies, 42, pp. 1033–1038.CrossRefGoogle Scholar
Weale, M.R., Blake, A.P., Christodoulakis, N., Meade, J.E. and Vines, D.A. (1989), Macroeconomic Policy: Inflation, Wealth and the Exchange Rate, London, Unwin Hyman.Google Scholar
Wyplosz, C. (2005), ‘Fiscal policy: institutions versus rules’, National Institute Economic Review, 191, pp.CrossRefGoogle Scholar