Direction des tudes et Synthses conomiques Dpartement des

Direction des Études et Synthèses Économiques Département des Études Économiques d’Ensemble Measuring and interpreting household saving rate Cédric Audenis Stéphane Gregoir Claudie Louvot

Informational contents of the saving rate : unconsumed fraction of income derived from gross (or net) production and capital Ø Short term : • Country’s capacity to cope with a cyclical downturn • Saving for rainy days (health problems, unemployment, …) Ø Long term : Country’s capacity to finance itself • Saving for retirement • « Measuring and interpreting household saving rate» – D 3 E 2

Objectives Ø Looking for a meaningful and internationally comparable measures of household saving rate § No information on the absolute level § Not necessarily the measure adapted to econometric modellings « Measuring and interpreting household saving rate» – D 3 E 3

« Measuring and interpreting household saving rate» – D 3 E 4

For a more comparable measure 6 issues Ø Various institutions : § The relative size of individually identifiable consumption § The existence of pension funds § The relative share of indirect taxes Ø Measurement and conceptual issues § The measurement of FCC § Accounting for holding gains § Durable goods consumption « Measuring and interpreting household saving rate» – D 3 E 5

A measure that can be constructed today (I) Ø Various institutions : more socialised economies have larger « standard » saving rate « Measuring and interpreting household saving rate» – D 3 E 6

A common measure that can be constructed today (II) Ø Statistical treatment of the voluntary saving for retirement § Pension funds ~public pension schemes (SNA 93) § Various definitions : Pension funds ~life insurance « Measuring and interpreting household saving rate» – D 3 E 7

« Measuring and interpreting household saving rate» – D 3 E 8

Possible improvements : capital depreciation ØNeed of net saving rate BUT ØStatistical measure of capital depreciation § Difficult to measure : housing service of constant quality ØHarmonization in progress « Measuring and interpreting household saving rate» – D 3 E 9

Possible improvements : indirect taxes Ø Heterogeneity in the structure of taxes : ceteris paribus, a larger share of indirect taxes on consumption implied a lower saving rate § Indirect taxes deducted from disposable income, indirect taxes deducted from consumption § Saving reduce by indirect taxes levied on investment Ø Ambiguous impact on the saving rate « Measuring and interpreting household saving rate» – D 3 E 10

Topics that merit closer examination : capital gains Ø How to deal with capital gains ? § « realised » and « unrealised » capital gains § Measurement problem : quoted/unquoted shares and their relative share in household portfolio § Only capital gains realised vis-à-vis another sector might be considered as household income and possibly saving. Ø Taxes levied on capital gains : indirect and very rough « Measuring and interpreting household saving rate» – D 3 E 11

Topics that merit closer examination : durable goods Ø For some durable goods : consumption is close to investment decision § In terms of agent behaviour § Measurement issue : resource : income related to the production of durable-goods-related services, use : user cost of durable goods Ø Different public utilities may lead to different durable goods consumption « Measuring and interpreting household saving rate» – D 3 E 12

Conclusion Impact of Adjusted income FCC Indirect taxes Pension funds Durable goods Capital gains Change in French saving rate -3 -5. 5 1. 7 0 6. 3 4. 5 « Measuring and interpreting household saving rate» – D 3 E ? ? 13