Concepts and Measures of Saving: Selected Issues for South Africa

Abstract

South African household savings rates have been declining steadily over the last five decades, raising concerns that the population structurally under-saves. Against the background of new saving-enhancing policy initiatives, this paper asks to what extent the concern is founded, and whether the measurement of saving is really appropriate to guide economic policy. Comparing different macroeconomic concepts and measurements of saving, we show that the measure of saving in the national accounts (the residual between income and expenditure) understates the household savings rate compared to other measures. Specifically, an alternative measure from the balance sheets (the change in wealth) yields a significantly higher and non-declining figure. While households have not been "putting aside" their incomes, they have nevertheless grown richer, driven largely by the appreciation of asset valuations. We also examine the impact of taking nonfinancial saving and wealth into account, and conclude that household sector saving on the aggregate is significantly higher than the national accounts suggest. However, these adjusted measures are most relevant for the upper tail of the income and wealth distribution, raising important distributional concerns. JEL Classification: E01, E21

Household saving and wealth in South Africa

“…As far as empirical literature is concerned, Orthofer (2015Orthofer ( , 2017 made important contributions, and lamented the lack of focus on and attention to what exactly is measured as saving in the national accounts. Her findings for South Africa mirror those of Hodgetts et al (2006), in the sense that a steady decline in household saving rates is observed, while household net worth had simultaneously risen strongly, driven to a large extent by the appreciation of asset valuations, notably domestic corporate equities.…”

Essays on households\' consumption and saving

“…All three measures, by construction, comprise the investments in own real estate properties, which account for a relevant portion of household wealth in Brazil (DIAS et al, 2019;MARQUETTI, 2009). In particular, the difference between these measures encompasses the household decisions toward the expected stream of services from durable goods (CROSSLEY; O'DEA, 2010), and further, toward human capital accumulation (ORTHOFER, 2017;SILVEIRA;MOREIRA, 2015).…”