Issues in National Savings Policy
40 Pages Posted: 8 Jun 2004 Last revised: 6 Sep 2010
Date Written: September 1985
This paper reviews a number of issues relating to the policy goal of increasing national savings. The first section considers the measurement and definition of national savings. Comparisons of current US savings rates with those of other countries and with the past US experience are presented. The second section considers possible avenues through which public policy can increase natianal savings. While most discussion has centered on the effects of changes in the rate of return received by savers, this is far from the only channel through which policy can effect savings. I conclude that changes in public savings or dissaving through budget surpluses or deficits are the most potent and reliable policy tool for altering the saving rate. The third section of the paper examines a crucial savings policy question. Where will extra savings go? Both empirical estimates and econometric model simulations suggest will find their way into increased plant and equipment investment. A major effect of increased savings would be to reduce capital inflows and improve American competitiveness.
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