Alternative Measures of Personal Saving

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Alternative Measures of Personal Saving
By Maria G. Perozek and Marshall B.
Reinsdorf Survey of Current Business 82 (April
2002) 13-24.
Federal Reserve Board Bureau of Economic
Analysis
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Recent changes affecting household saving, wealth

• Dramatic stock market rise (1995 - March 2000)
  and fall (March 2000 - present).
• Large changes in net worth, mostly reflecting
  holding gains.
• Marked decline in personal saving from 8.7
  percent in 1992 to 2.3 percent in 2001.

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Interpreting Personal (household) saving

• Issues with sector definitions
• Defined benefit pension plans
• large holding gains can make the plan over
  funded, meaning that the employer is not
  required to contribute to the plan.
• DB plans explain about 1 percentage point of the
  drop.

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Consumer durable goods

• BEA has measures of consumer durables stocks and
  net acquisition, based on perpetual inventory
  model.
• Part of decline in saving rate reflected net
  acquisition of durables

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Effect of inflation

• Inflation was mild in USA during 1990s
• Because households net lenders, inflation causes
  saving to be overstated.
• Compared with early 1980s, effect is about 2
  percentage points.

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Capital gains taxes

• Capital gains are excluded from disposable income
  but taxes are treated as current taxes.
• Growth in capital gains taxes accounts for about
  1 percentage point.

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Measures of wealth accumulation
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