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Domestic private savings

Capital formation essential for economic growth must be financed by savings from some source: public savings, foreign savings or domestic private savings. Mobilization of public savings requires a well-functioning tax system. We have seen, however, that a part of any increase in public sector savings gathered by government taxes will come at the expense of private savings: as much as 50%, according to some studies. Foreign savings (foreign investment and/or foreign aid) are difficult to mobilize on an ongoing basis. Most countries seeking economic growth must therefore place strong reliance on domestic private savings for financing domestic capital formation.

Components of domestic private savings

We first consider private household savings. Household savings includes savings in unincorporated enterprises (proprietorships, partnerships). In fact, small and medium sized private firms have been a substantial source of investment finance in many emerging nations. In the past few decades – these same enterprises typically provide the lion’s share of growth in jobs , as in the U.S., Germany and Korea 1960-1995. Worldwide smaller scale enterprises were responsible for 80% of employment in the three decades prior to 2010.

Consider the following taxonomy of domestic private savings (recall, saving is simply not consumption).

  1. Developed Nations – Domestic Private Savings are dominated by:
    1. Time Deposits (Saving Accounts).
    2. Bonds (Debt Instruments).
      • Corporate Bonds
      • Government Bonds
    3. Stocks (Equity Instruments).
    4. On occasion Social Security. Not in the U.S., because U.S. Social Security system is a pay as you go system. So the U.S. Social Security system is not funded. Systems used in Singapore and Chile are funded and therefore are components of savings.
    5. Corporate Savings (Retained Earnings of Corporations). This is Net Income after tax income not paid out as Corporate Dividends).
    6. Accumulated Net Wealth in Housing.
    7. Whole Life Insurance Policies.
    8. Durable Goods. Physical Assets with useful lives greater than one year.

Developing countries

Private Savings in emerging nations consist mainly of categories #1, #5, #6 and #7, with some twists. In the past categories #2 and #3 in past (Bonds, Stocks) were not all that important in emerging nations because the organized financial system in emerging nations is not usually that well developed. However with growing capital mobility this is changing. Category #8 durable goods is interesting. In rich countries one rarely considers purchases of laptops as an act of savings. But it is non-consumption in any context? It generates future income, for many households (not all, of course).

We first provide some perspective on private savings by examining the U.S. experience since 1960.


In some recent years net private savings was negative in the U.S.

2005 -2.6%
2006 -3.8%
2007 -2.4%
2008 +1.6%
2009 +7.7%

So now something very interesting happened to private savings in U.S. after 2007. 2007 was the very year the financial meltdown started, beginning the so-called “great recession”. In the U.S. in 2007, net private savings turned positive for the first time in fifteen years. Net private U.S. savings in 2007 were 1.6% of GDP. And in 2008, U.S. private savings, as % of GDP was 7.7%, and rose further by 2010.

Questions & Answers

what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
How we are making nano material?
what is a peer
What is meant by 'nano scale'?
What is STMs full form?
scanning tunneling microscope
how nano science is used for hydrophobicity
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
what is differents between GO and RGO?
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
The nanotechnology is as new science, to scale nanometric
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
what school?
biomolecules are e building blocks of every organics and inorganic materials.
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
sciencedirect big data base
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
it is a goid question and i want to know the answer as well
characteristics of micro business
for teaching engĺish at school how nano technology help us
How can I make nanorobot?
Do somebody tell me a best nano engineering book for beginners?
s. Reply
there is no specific books for beginners but there is book called principle of nanotechnology
how can I make nanorobot?
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
what is the actual application of fullerenes nowadays?
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
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Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
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