Sahra Wagenknecht. Hie Limits of Choice. Saving Decisions and Basic Needs in Developed Countries. Campus Verlag Frankfurt/New York

Transcription

1 Sahra Wagenknecht Hie Limits of Choice Saving Decisions and Basic Needs in Developed Countries Campus Verlag Frankfurt/New York

2 Contents List of Figures 11 List of Variables and Abbreviations 13 Introduction 19 Chapter 1. Stylised Facts of Saving Paragraph 1.1 Data Sets and Statistical Issues Various Saving Aggregates and Their Relationship Macroeconomic Data Sources for the U.S. and Germany Measurement Problems - Saving Offshore or Saving Out of Realised Capital Gains Statistical Revisions Microeconomic Data Sources for the U.S. and Germany 38 Paragraph 1.2 The Historic Path of Saving General Trends in the OECD Saving in the U.S. and its Various Components Saving in Germany and its Various Components 44 Paragraph 1.3 Stylised Facts at the Macroeconomic Level Real Income Growth Real Interest Rates Inflation Unemployment and Social Security Standards Demographics 55

3 6 THE LIMITS OF CHOICE Inequality Institutional Environment Persistency 59 Paragraph 1.4 Stylised Facts at the Microeconomic Level Macroeconomic Facts and Microeconomic Distributions Saving Rates in Cross-Section Current Income, Real and Relative Permanent Income The Distribution of Financial Wealth Growth, Income Fluctuations and the Role of Expectations Uncertainty and Precautionary Saving Life-Cycle Patterns of Saving Saving Motives 87 Paragraph 1.5 Summary: Stylised Facts of Saving 89 Chapter 2. Do Standard Models of Saving Match the Facts? Paragraph 2.1 The Standard LCPIH Basic Ideas of the Standard Approach The Modigliani-Diagram The Perfect Foresight Model in Discrete Time The Perfect Foresight Model in Continuous Time The Certainty Equivalent Model 104 Paragraph 2.2 The Empirical Failure of the Standard Models Excess Sensitivity and Excess Smoothness - Ambiguous Results MPC and Income Growth - Wrong Predictions Incapability to Explain Saving Rate Differentials 110 Paragraph 2.3 Refinements: Allowing for Precautionary Saving, Liquidity Constraints and Habit Formation Convex Marginal Utility and the Precaution^ Motive 112

4 CONTENTS The Technique of Stochastic Dynamic Programming The Buffer-Stock Model Liquidity Constrained Consumers Models Including Habit Formation 121 Paragraph 2.4 Do the Elaborated Models Perform Better? Gain in Realism at the Cost of Predictive Power Remaining Deficiencies 126 Paragraph 2.5 The Optimal Consumption Path General Remarks Hidden Assumptions and Fundamental Flaws Arguments of the Utility Function Wealth as an End in Itself A Realistic Time-Horizon The Representative Consumer Per-period Consumption as a Single Entity The Elasticity of Intertemporal Substitution The Optimising Procedure - Benefits and Costs 145 Chapter 3. A New Approach to Saving Behaviour Paragraph 3.1 Basic Needs and Saving The Relative-Income Hypothesis Subsistence Consumption in Developing Countries Necessities in Developed Countries 156 Paragraph 3.2. Basic Needs in Standard Models Introducing Good-specific Subsistence Points into a Standard Dixit-Stiglitz framework Intertemporal Optimisation with Moving Subsistence Consumption 171 Paragraph 3.3 Modelling Saving Decisions by a Simple Rule of Thumb The Necessity Share in Outlay and in Income 180

5 8 THE LIMITS OF CHOICE Determinants of Saving under the Proposed Rule of Thumb The Aggregated Saving Rate under the Given Rule of Thumb Factors Influencing the Propensity to Save and to Dissave Summary: Model Predictions 192 Chapter 4. The Patterns of Consumption Shares Paragraph 4.1 How to Identify Basic Needs? Two Approaches to the Historic Path of the Necessity Share Basic Expenditure Groups versus Luxury Spending 200 Paragraph 4.2 Consumption Patterns at the Macroeconomic Level Consumption Shares and Sectoral Prices in Germany Consumption Shares and Sectoral Prices in the U.S 206 Paragraph 4.3 Consumption Patterns at the Microeconomic Level Methodological Notes Food Shelter Clothing Transportation Communication Furniture and Household Devices Health Care Entertainment and Recreation Education Restaurants and Hotels 220 Paragraph 4.4 Summary: The Historic Path of the Necessity Share What Belongs in the Necessity Basket? 221 ^

6 CONTENTS First Approach to the Necessity Share Second Approach to the Necessity Share The Individual Necessity Share 229 Chapter 5. Does Our Model Match the Facts? Paragraph 5.1 Model Predictions and the Stylised Facts of Saving 235 Paragraph 5.2 Model Predictions and Empirical Evidence at the Microeconomic Level The Necessity Share and German Saving Rates Reproducing U.S. Saving Rates of the Mid-20th Century 250 Paragraph 5.3 Model Predictions and Empirical Evidence at the Macroeconomic Level Preliminary Notes Saving Rate and Basic Needs in Germany Saving Rate and Basic Needs in the U.S Is Our Model Able to Reproduce the Historic Path? 266 Summary 303 References 309