Aggregate Savings Research Articles

Equilibria in an overlapping generations model with transfer policies and exogenous growth

For an overlapping generations economy with varying life-cycle productivity, non-stationary endowments, continuous time starting at $$-\infty $$ (hence allowing for full anticipation), constant-returns-to-scale production and ces utility, we fully characterise equilibria where output is higher than investment, which is strictly positive. Net assets (aggregate savings minus the value of the capital stock) are constant in any equilibrium, and, for balanced growth equilibria (bge, defined for an economy with stationary endowments), net assets are non-zero only in the golden rule equilibrium, in accord with Gale (1973). The number of bge is finite. Their parity, however, depends on the life-cycle productivity, in particular, on the relation between the intertemporal elasticity of substitution, the minimal working age and the minimal tax age.

Equilibria in an Overlapping Generations Model with Transfer Policies and Exogenous Growth

For an overlapping generations economy with varying life-cycle productivity, non-stationary endowments, continuous time starting at −∞(hence allowing for full anticipation), constant-returns-to-scale production and CES utility we fully characterise equilibria where output is higher than investment, which is strictly positive. Net assets (aggregate savings minus the value of the capital stock) are constant in any equilibrium, and, for balanced growth equilibria (BGE, defined for an economy with stationary endowments), net assets are non-zero only in the golden rule equilibrium, in accord with Gale 1973. The number of BGE is finite. Their parity, however, depends on the life-cycle productivity, in particular, on the relation between the intertemporal elasticity of substitution, the minimal working age and the minimal tax age.

Safety first consumption

Abstract This paper develops a model of safety first consumption behavior in which the likelihood of survival to the next period depends on current consumption levels. Below a threshold asset level, individuals follow a decumulation path, and above that level they follow an accumulation path. Saving rates then vary discontinuously with asset level, generating a poverty trap and divergence in incomes. An increase in the likelihood of surviving raises aggregate saving. A more equitable distribution of assets can be consistent with greater aggregate savings and growth because of declining marginal propensity to save over some asset intervals.

Aggregate Savings and External Imbalances in China

Over the last decade, the internal and external macroeconomic imbalances in China have risen to unprecedented levels. In 2008, China's national savings rate soared to over 53 percent of its GDP, whereas its current account surplus exceeded 9 percent of GDP. This paper presents a unified framework for understanding the structural causes of these imbalances. I argue that the imbalances are attributable to a set of policies and institutions embedded in the economy. I propose a unified framework for understanding the joint causes of the high savings rate and external imbalances in China. My explanations first focus on an array of factors that encouraged saving across the corporate, government, and household sectors, such as policies that affected sectoral income distribution, along with factors like incomplete social welfare reforms, and population control policies. I then turn to policies that limited investment in China, thus preventing the high savings from being used domestically. Finally, I will examine how trade policies, such as export tax rebates, special economic zones, and exchange rate policies, strongly promote exports. Moreover, the accession of China to the World Trade Organization has dramatically amplified the effects of these structural distortions. In conclusion, I recommend some policy reforms for rebalancing the Chinese economy.

Economic and Humanistic Consequences of Preventable Bladder Tumor Recurrences in Nonmuscle Invasive Bladder Cancer Cases

Perioperative intravesical chemotherapy following transurethral resection of bladder tumor has been underused despite level 1 evidence supporting its performance. The primary objective of this study was to estimate the economic and humanistic consequences associated with preventable recurrences in patients initially diagnosed with nonmuscle invasive bladder cancer. Using population based estimates of nonmuscle invasive bladder cancer incidence, a 2-year model was developed to estimate the number of preventable recurrences in eligible patients untreated with perioperative intravesical chemotherapy. Therapy utilization rates were obtained from a retrospective database analysis and a chart review study of 1,010 patients with nonmuscle invasive bladder cancer. Recurrence rates of nonmuscle invasive bladder cancer were obtained from a randomized clinical trial comparing transurethral resection of bladder tumor with or without perioperative mitomycin C. Costs were estimated using prevailing Medicare reimbursement rates. Quality adjusted life-year estimates and disutilities for complications were obtained from the literature. The model estimated that 7,827 bladder recurrences could be avoided if all patients received immediate intravesical chemotherapy. It estimated an economic savings of $3,847 per avoidable recurrence, resulting in an aggregate savings of $30.1 million. The model also estimated that 1,025 quality adjusted life-years are lost every 2 years due to preventable recurrences, resulting in 0.13 quality adjusted life-years (48 quality adjusted days) lost per avoidable recurrence. This translates into 0.02 quality adjusted life-years (8.1 quality adjusted days) lost per patient not receiving immediate intravesical chemotherapy. Greater use of immediate intravesical chemotherapy in the United States has the potential to substantially decrease the economic and humanistic burdens of nonmuscle invasive bladder cancer.

Effects of Bank Credit on Industrial Performance in Nigeria

This paper investigates the effect of bank loans and advances on industrial performance in Nigeria between 1975 and 2009. Co-integration and Error Correction technique was adopted for the analysis. The results showed that industrial performance co-integrated with all the identified explanatory variables. Industrial sector as dependent variable is proxied by real GDP, while Commercial Banks’ Loan and Advances to Industrial Sector (BLM), Aggregate Saving (SAV), Interest rate (INT), Inflation Rate (INF) are the independent variables. This suggests that the behavior of real Gross Domestic Product contributed by industrial sector in Nigeria is significantly explained by the commercial banks’ loan and advances to industrial sector, aggregate saving, interest rate and inflation rate. The findings implies that every action towards infrastructural development, strengthening of commercial banks, deregulation of interest rate, encouragement of saving among rural dwellers and reduction of inflation rate will boost the performance of industrial sector significantly. Key words: Bank credit; Industrial performance; Nigeria

An assessment of the cost-effectiveness of midwife-led care in the United Kingdom

Objectivesto analyse the existing evidence on the cost-effectiveness of midwife-led care compared with consultant-led care in settings potentially generalisable to the United Kingdom, and to estimate the potential cost savings accruing from an expansion of midwife-led care in the United Kingdom. Designa systematic review of the literature was conducted across twelve electronic databases for papers relating to the costs of midwife-led models of care. Randomised controlled trials, controlled clinical trials, controlled before and after studies and interrupted time series studies were considered for inclusion. The methods specified by the National Institute for Health and Clinical Excellence to assess the cost-effectiveness of midwife-led care were broadly used. Multiple simple one-way sensitivity analyses were undertaken to examine the robustness of findings to varying scenarios. Findingsbased on scant existing evidence, the mean cost saving for each eligible maternity was estimated at approximately ST£12.38 (sterling). If midwife-led services were expanded to 50% of all eligible women in the UK, as assumed in the main set of results, this would result in an aggregate cost saving of ST£1.16 million per year. In the sensitivity analyses, cost changes per maternity vary from a saving of ST£253.38 to a cost increase of ST£108.12 depending on the assumptions used, corresponding to aggregate savings of ST£23.75 million and a cost increase of ST£10.13 million. Key conclusionsexpanding midwife-led maternity services for eligible women may offer a means of reducing costs compared to the current leading model of care. However, firm conclusions are elusive due to the paucity of evidence. Implications for practicethere is a clear need for further economic evaluations of models of maternity care in the United Kingdom context to guide the better use of scarce resources.

Pension Funds’ Contribution to the Enhancement of Aggregate Private Saving: A Panel Data Analysis for Emerging Economies

We carried out an analysis of fully-funded pension regimes based on individual accounts implemented since the 1980s in six Latin American countries (Argentina, Chile, Colombia, Mexico, Peru and Uruguay), in order to ascertain whether they were conducive to increasing aggregate savings and helped to strengthen domestic stock markets. To this end, we used a version of the life-cycle model. We also studied the impact on private savings of a group of economic and demographic variables which the related literature usually links to the performance of both defined-benefit and defined-contribution pension systems. The impact of individual accounts systems upon aggregate private savings was assessed under different scenarios such as: homogeneous and heterogeneous individuals, voluntary and compulsory contributions and loose and tight borrowing constraints. The theoretical analysis made it possible to prove that only under mandatory contributions and operating liquidity restrictions would private savings be unambiguously increased by pension fund assets.

Aggregate Savings and External Imbalances in China

Over the last decade, the internal and external macroeconomic imbalances in China have risen to unprecedented levels. In 2008, China's national savings rate soared to over 53 percent of its GDP, whereas its current account surplus exceeded 9 percent of GDP. The current paper presents a unified framework for understanding the structural causes of these imbalances. I argue that the imbalances are attributable to a set of policies and institutions embedded in the economy. Moreover, the accession of China to the World Trade Organization has dramatically amplified the effects of these structural distortions. I document major trends in aggregate savings, investment, trade, and net foreign asset positions in China, and explore options for policy reforms aimed at rebalancing the Chinese economy.

Aggregate savings, finance and investment

Among the areas in which the Keynesian revolution has been more unsuccessful in changing orthodox views, the relationship between savings and investment must certainly be the best known. Even today, after more than seventy years of publication of The General Theory, policy-makers are still advised to raise national savings rates in order to accelerate growth (and, more recently, end the crisis initiated in 2007 in the United States). Keynes's proposition that investment creates savings, and not the converse, seems to violate fundamental intuitions of economists as well as of the general public. In fact, investment creates savings in monetary economies, the operation of which is harder to grasp than the corn economy that inspires the opposite causality. How is the relationship between savings and investment defined in Keynesian and orthodox theories? In this paper, Keynes's views are contrasted to Wicksell's and to Wicksellian approaches embodied in loanable funds theories. In particular, one searches to clarify the theoretical relationship between the concept of aggregate savings (non-consumed output) and financial savings (net demand for assets) that should be more relevant to a discussion of investment finance. The special concept of finance employed by Keynes is used to stress the role played by banks in Keynes's theory and, in combination with his rejection of Say's law, to clarify the meaning of the »investment creates saving« proposition.

The Determinants of Household Savings in South Africa

In South Africa, substantial government dissaving as well as poor household savings performance has caused a decline in aggregate savings. Whilst government dissaving has been successfully reversed, household savings continue to fall. Low domestic savings have required South Africa to attract large, volatile portfolio capital inflows to fund a structural current account deficit. Repeated reversals of such inflows have constrained domestic growth and hence an understanding of the factors that have caused this decline in savings is essential in order to formulate policies supportive of sustained higher rates of economic growth. Within the context of the existing literature, this article examines the various determinants of household savings using a vector error-correction model (VECM). The results suggest that interest rates, a wealth effect and upturns in the business cycle all contribute to explaining the decline in household savings. The presence of a partial offset between household savings and government savings also has important implications for the effectiveness of using the fiscal position of the South African government to boost savings.

The “all-in-one” appendectomy: quick, scarless, and less costly

Background A technique for laparoscopic appendectomy (LAP APPY) that involves brief surgeon and operating room times, results in no appreciable scar, and requires few disposable supplies would be desirable. Methods During 2009, 508 children underwent LAP APPY at our institution including 398 (78%) for acute, non-perforated appendicitis. Our “all-in-one” operative procedure involves use of a single instrument through a side-arm viewing operative laparoscope which is inserted through a single, trans-umbilical port. Successful procedure completion rates and operative times (“cut-to-close”) were determined. Our data for surgeon-directed, disposable supply costs per procedure were collated by Child Health Corporation of America and compared with 2009 LAP APPY data (n = 5692) from 17 other children's hospitals in the United States. Results We successfully completed 359 (90.2%) LAP APPY procedures using the all-in-one technique resulting in no appreciable scar. Additional ports were used in 9.8% and there were no conversions to open procedures. Median operative time for the all-in-one technique was 24 minutes (5-66 min). Our median surgeon-directed, disposable supply cost was the lowest in the study group and significantly less than the other 17 children's hospitals ($166 vs $748, P < .001). Median variation of supply costs among surgeons within each institution was $448 ($3-$870). Aggregate savings of nearly $1.3 million are predicted if all study surgeons were to reduce their disposable costs per procedure to the 25th percentile ($551). Conclusions We conclude that the all-in-one laparoscopic appendectomy technique is quick, scarless, and less costly than conventional multi-port techniques. Wider application of the all-in-one technique seems indicated.

On Income and Wealth Taxation in a Life‐Cycle Model with Extensive Labour Supply

In a stationary life-cycle model with extensive labour supply, two forms of taxation are studied: non-linear income taxation and linear wealth taxation. In the life-cycle model, the social weights of the dynasties depend on their permanent incomes, not on the observed taxable current income. A tax on wealth then can complement income tax as a redistributive tool. The derivative of social welfare with respect to the wealth tax rate at the no-tax point is computed. It is positive whenever permanent income is positively correlated with aggregate life time savings. This result is illustrated on a numerical example.

The relative income hypothesis

Despite its theoretical dominance, the empirical case in favor of the permanent income hypothesis is weak. Contrary to one of its basic implications, a growing body of evidence suggests that rich households save a higher proportion of their permanent income than poor households. We propose an overlapping-generations economy where households care about relative consumption. As a result, an individual's consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group; a permanent income version of Duesenberry's (1949) relative income hypothesis. Across households the savings rate increases with income while aggregate savings are independent of the income distribution.

Steady-state growth and the elasticity of substitution

In a neoclassical economy with endogenous capital- and labor-augmenting technical change the steady-state growth rate of output per worker is shown to increase in the elasticity of substitution between capital and labor. This confirms the assessment of Klump and de La Grandville (2000) that a greater elasticity of substitution allows for faster of economic growth. However, unlike their findings my result applies to the steady-state growth rate. Moreover, it does not hinge on particular assumptions on how aggregate savings come about. It holds for any household sector allowing savings to grow at the same rate as aggregate output.

Estimating the Impact of the 1999 Pension Reform in Poland, 2000-2050

This paper gives an account of the main aims and principles of the reform measures which came into force in 1999. Its primary objective is to present estimations of the effects of these measures on the composition of the pension system, over the next 50 years, in terms of institutions, expenditures and revenues. Within the segment of retirement pensions outside agriculture, the 1999 reform is found capable of achieving its key objectives concerning work incentives, total spending and aggregate savings. However, invalidity and family pensions for all and retirement pensions for farmers represent three segments which are yet to be properly reformed. The paper concludes that the 1999 reform should arrest a further deterioration of public sector finances with respect to pensions, but any reduction of Poland's exceptionally large both public spending on pensions and social security contributions is contingent on adopting radical reforms also in these three segments.

Safety First Consumption

This paper develops a model of safety first consumption behavior in which the likelihood of survival to the next period depends on current consumption levels. Below a threshold asset level, individuals follow a decumulation path, and above that level they follow an accumulation path. Saving rates then vary discontinuously with asset level, generating a poverty trap and divergence in incomes. Reduction of risk raises saving rates. A more equitable distribution of assets can be consistent with greater aggregate savings and growth because of declining marginal propensity to save over some asset intervals.

Capital Markets Integration and Labor Market Institutions

A major development in recent decades in industrialized countries is the decline in national savings rates. Over the same period, in many countries the labor's share of national income has declined and liberalizing labor market reforms have been implemented. This paper seeks to provide a unified account of these developments. We show that globalization, in the form of increased capital mobility, provides incentives to implement labor market reforms that raise the returns to capital and improve efficiency. Nevertheless, in a world where aggregate savings reflect life-cycle motives and are mainly performed out of labor income, the associated fall in the labor share reduces aggregate savings and the pace of capital accumulation.

Steady-State Growth and the Elasticity of Substitution

In a neoclassical economy with endogenous capital- and labor-augmenting technical change the steady-state growth rate of output per worker is shown to increase in the elasticity of substitution between capital and labor. This confirms the assessment of Klump and de La Grandville (2000) that the elasticity of substitution is a powerful engine of economic growth. However, unlike their findings my result applies to the steady-state growth rate. Moreover, it does not hinge on particular assumptions on how aggregate savings come about. It holds for any household sector allowing savings to grow at the same rate as aggregate output.

The Development of Household Saving Rates in Germany – An Analysis Using Data from the SOEP (Zur Entwicklung Der Sparquoten Der Privaten Haushalte – Eine Auswertung Von Haushaltsdaten Des SOEP)

According to the National Accounts the German savings rate has increased continuously since 2001 after it fell continuously from 1991. This increase was rather unexpected and hence it is interesting to analyse whether the savings rate of the total population has increased or whether the increase in the aggregated savings rate has been due to the fact that the savings behaviour of certain socio-economic groups developed differently during the last decade. For this project data from the German Socio-Economic Panel (SOEP) is used for the years 1995 to 2007. The analysis of household’s savings rates differentiated according to socio-economic characteristics shows, that the savings rates develop differently depending on the respective householder’s labour market status. The examination of savings rates of different age groups does not provide conclusive results. Finally, the increase in the aggregate savings rate is attributed alone to the changed savings behaviour of the households in the top quartile of the income distribution whereas the savings rates of the other quartiles tend to have declined.