Comparison of household saving ratios

9 June 2004

Euro area / United States / Japan

The European Central Bank and the Organisation for Economic Co-operation and Development have published today a joint study comparing household saving ratios in the euro area, the United States and Japan (pdf file).

Households play a significant role in the economy. Their saving ratio is a summary measure of their income, consumption and saving activities.[1] Published household saving ratios are not fully harmonised across countries. The study published today presents, for the first time, experimental comparable saving ratios for the euro area, the United States and Japan. Although the ratios for all three economic areas declined in the course of the 1990s, the difference between the ratios in the euro area (9.6% in 2002) and the United States (2.4% in 2002) is significant and has even risen during that period. Japan has had a household saving ratio close to that of the euro area, except for 2001 and 2002 (5.2%).

Part of this difference could potentially be explained by the varying legal and administrative arrangements in the areas concerned. The study analyses for three of these arrangements the possible effects on the household saving ratio: (1) the level of household consumption of public services; (2) the financing of government expenditure through income taxes or taxes on production and imports (like VAT); and (3) the organisation of pension arrangements through social security schemes or private pension schemes. Each of these causes could be behind some of the differences in the household saving ratios, but - when taken together - the divergence among the three areas concerned actually increases. A number of other factors, including households’ attitudes towards consumption and saving, and their possession of household durables, must be the cause of the differences between household saving ratios for the euro area, the United States and Japan.

[1] The household saving ratio is defined as household (net) saving divided by (net) disposable income. Household disposable income comprises the current income of households from production plus property and transfer receipts (such as interest, dividends and social benefits) minus payments (such as interest payments and income tax). Household disposable income is used for final consumption or is saved.

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