The present paper provides an analytical discussion on a popular issue: the measurement problems associated with the inflation tax. It is well known that conventional national accounts definitions usually misplace the proceeds from the inflation tax: they are typically not subtracted from disposable income, and they are not included as part of the Government’s revenues “above the line.” Using a simple, perfect foresight monetary model developed by Calvo (1986, 1987), this paper analyzes the difference between macroeconomically relevant concepts of public and private saving, and their national accounts counterparts. The paper goes on to show that the national account aggregates create the impression that heavier reliance on the inflation tax on the part of the Government is associated with higher private saving, even in situations where the composition of government revenues does not have any effect on private saving.

The official personal and private saving statistics contain a number of conceptual measurement errors. In this paper we develop and analyze personal and private saving measures adjusted for the difference between income tax payments and actual liabilities, saving via net purchases of government pension assets (including social security) and consumer durables, and that part of after-tax interest income attributable to inflation. We find that the adjusted personal and private saving rates in recent years are only slightly below their post-1950 averages, not at all time lows as reported in the official NIPA statistics. Furthermore, over the past 35 years, personal saving has been more volatile and corporate saving less volatile than the official measures. Also, the inflation premium corrections remove the negative correlation between personal and corporate saving. That is, the often observed negative correlation between the official measures of personal and corporate saving is due solely to measurement errors in the two series. Finally, the decrease in federal government saving in the 1980s is the continuation of a 30-year trend, not a one-time aberration.

The official personal and private saving statistics contain a number of conceptual measurement errors. In this paper we develop and analyze personal and private saving measures adjusted for the difference between income tax payments and actual liabilities, saving via net purchases of government pension assets (including social security) and consumer durables, and that part of after-tax interest income attributable to inflation. We find that the adjusted personal and private saving rates in recent years are only slightly below their post-1950 averages, not at all time lows as reported in the official NIPA statistics. Furthermore, over the past 35 years, personal saving has been more volatile and corporate saving less volatile than the official measures. Also, the inflation premium corrections remove the negative correlation between personal and corporate saving. That is, the often observed negative correlation between the official measures of personal and corporate saving is due solely to measurement errors in the two series. Finally, the decrease in federal government saving in the 1980s is the continuation of a 30-year trend, not a one-time aberration.

A collection of essays, studies, and discussions on the low rate of savings in the United States as compared to other industrial countries. The authors are prominent policymakers, academians and business leaders. Topics covered include the US savings and investment rate, the impact of tax policies on savings, and strategies for increasing personal and business savings.

The Field of Public Economics has been changing rapidly in recent years, and the sixteen chapters contained in this Handbook survey many of the new developments. As a field, Public Economics is defined by its objectives rather than its techniques and much of what is new is the application of modern methods of economic theory and econometrics to problems that have been addressed by economists for over two hundred years. More generally, the discussion of public finance issues also involves elements of political science, finance and philosophy. These connections are evidence in several of the chapters that follow. Public Economics is the positive and normative study of government's effect on the economy. We attempt to explain why government behaves as it does, how its behavior influences the behavior of private firms and households, and what the welfare effects of such changes in behavior are. Following Musgrave (1959) one may imagine three purposes for government intervention in the economy: allocation, when market failure causes the private outcome to be Pareto inefficient, distribution, when the private market outcome leaves some individuals with unacceptably low shares in the fruits of the economy, and stabilization, when the private market outcome leaves some of the economy's resources underutilized. The recent trend in economic research has tended to emphasize the character of stabilization problems as problems of allocation in the labor market. The effects that government intervention can have on the allocation and distribution of an economy's resources are described in terms of efficiency and incidence effects. These are the primary measures used to evaluate the welfare effects of government policy.

This paper assesses empirically the role of public policies in stimulating private savings and investment in sub-Saharan African countries, based on data for the period 1986-92. The main findings of the analysis are as follows: (i) policies effective in stimulating private savings and investment include those that keep the rate of inflation low, reduce macroeconomic uncertainty, promote financial deepening, and lower the external debt burden; (ii) measures that promote structural reforms and reduce the budget deficit (without lowering government investment) help to raise private investment; and (iii) declines in government savings are only partially offset by increases in private savings.