Of great concern and puzzlement to many has been the decline in the U.S. personal saving rate. From 8 percent of personal income 20 years ago, saving has fallen to less than 4 percent. This is a ...matter of concern because saving and investment are closely linked, and investment is believed critical to productivity gains and a rising standard of living. The decline in saving is also a source of puzzlement because it runs counter to many people's perception of what is happening.> This article investigates the decline in saving, focusing on "where the money went." The authors find that rising expenditures on medical services are absorbing a growing fraction of income. Thus, the saving problem is not about thrift versus profligacy, but rather a competition between more and better medical care, on the one hand, and more investment, on the other. They point out that efforts to stimulate saving are only one way to increase the economy's productive capacity, and that the ultimate goal is higher standards of living.
The steep drop in the U.S. personal saving rate over the last decade has fueled speculation that Americans are spending recklessly. But alternative measures of personal saving show that households ...are actually setting aside a larger share of their resources than the official figures suggest. In addition, government saving has risen markedly, leading to an increase in overall domestic saving that has helped finance a surge in U.S. investment.
Examines the types of help individuals in mid-life provide to an older parent and an adult child living in separate households. Finds mid-life individuals channel more support towards an adult child, ...than to a parent, that children receive predominantly financial help, that older parents receive help with daily tasks, and that both generations are given emotional support. Presents results of multivariate logistic regression which show that providing help to their own child increases the likelihood that the mid-lifer will also provide support to an ageing parent. Suggests policy makers reconsider the relevance of the household and shared residents as defining criteria for identifying 'family' and as a basis for assessing need. Source: National Library of New Zealand Te Puna Matauranga o Aotearoa, licensed by the Department of Internal Affairs for re-use under the Creative Commons Attribution 3.0 New Zealand Licence.
Do the rich save more? Dynan, Karen E; Skinner, Jonathan; Zeldes, Stephen P
2000
2000
Paper
The issue of whether higher lifetime income households save a larger fraction of their income is an important factor in the evaluation of tax and macroeconomic policy. Despite an outpouring of ...research on this topic in the 1950s and 1960s, the question remains unresolved and has since received little attention. This paper revisits the issue, using new empirical methods and the Panel Study on Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey. We first consider the various ways in which life cycle models can be altered to generate differences in saving rates by income groups: differences in Social Security benefits, different time preference rates, non-homothetic preferences, bequest motives, uncertainty, and consumption floors. Using a variety of instruments for lifetime income, we find a strong positive relationship between personal saving rates and lifetime income. The data do not support theories relying on time preference rates, non-homothetic preferences, or variations in Social Security benefits. Instead, the evidence is consistent with models in which precautionary saving and bequest motives drive variations in saving rates across income groups. Finally, we illustrate how models that assume a constant rate of saving across income groups can yield erroneous predictions.
In this paper, we examine household savings using data from the National Longitudinal Survey, Cohort 1997 (NLSY97). This data set provides detailed information about assets and liabilities of parents ...with teen-age children and allows researchers to examine patterns of accumulation at early stages of the life cycle. In our empirical work, we have first to deal with several problems in measuring wealth. While many respondents report owning assets and liabilities, they often do not report their values. This problem is severe, in particular among financial assets. It is also difficult to devise an appropriate measure of accumulation when examining young parents, since assets and liabilities display different degrees of liquidity. To get around the non-response problem, we impute the missing values for assets and liabilities. This allows us to calculate household wealth for the whole sample. We examine household wealth holdings by considering several measures of accumulation: total (non-pension) net worth, financial net worth, and retirement savings. We study their distribution across different demographic groups and show that many households, in particular those headed by young parents (younger than 35), minorities, and individuals with low educational attainment, display very little accumulation. Many have no financial assets and their total net worth is also low. Housing equity is the main asset in many household portfolios and often the only asset families own. Overall, there is much heterogeneity in wealth holdings not only across but also within demographic groups. This suggests that many factors are at play in shaping the wealth accumulation of parents with young children.
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