<< Chapter < Page Chapter >> Page >

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

Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
Renato
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
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
Adin
why?
Adin
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
research.net
kanaga
sciencedirect big data base
Ernesto
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.
Bharti
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
Daniel
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
Maciej
characteristics of micro business
Abigail
for teaching engĺish at school how nano technology help us
Anassong
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
NANO
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
s.
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.
Tarell
what is the actual application of fullerenes nowadays?
Damian
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.
Tarell
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
Mostly, they use nano carbon for electronics and for materials to be strengthened.
Virgil
is Bucky paper clear?
CYNTHIA
carbon nanotubes has various application in fuel cells membrane, current research on cancer drug,and in electronics MEMS and NEMS etc
NANO
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Harper
Do you know which machine is used to that process?
s.
how to fabricate graphene ink ?
SUYASH Reply
for screen printed electrodes ?
SUYASH
What is lattice structure?
s. Reply
of graphene you mean?
Ebrahim
or in general
Ebrahim
in general
s.
Graphene has a hexagonal structure
tahir
On having this app for quite a bit time, Haven't realised there's a chat room in it.
Cied
what is biological synthesis of nanoparticles
Sanket Reply
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
Good
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get the best Algebra and trigonometry course in your pocket!





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
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Economic development for the 21st century' conversation and receive update notifications?

Ask