Effects of Government Savings Promotion: Majority of Experts Are Optimistic

In the context of the current discussion about the introduction of privately funded elements into the old-age security system, the Centre for European Economic Research (ZEW) in Mannheim conducted a survey among 400 financial market analysts from banks, insurances and businesses in October 1999. The experts were asked to evaluate the effects of the government savings programme regarding private capital formation. Furthermore, they were asked to give their opinion on which measures should be given preference.

The majority of experts are generally optimistic about the effects of the government savings promotion measures, with an overwhelming 56 per cent expecting the saving rate to increase. About one quarter assumes increased savings in investment types that are funded and almost one third expects an additional shift in the portfolio of private investors. Still, 35 per cent of the analysts believe shifts in the investment behaviour to be a primary outcome of these measures. Less than 10 per cent expect the government savings promotion measures to have no outcome at all.

As a consequence, only a small share of experts rejects the savings promotion measures. The clear majority of experts (58 per cent) back the traditional measure of government incentives for voluntary savings. At least 35 per cent favour, either exclusively or additionally, a mandatory private saving rate: a reform proposal, which has been met with little sympathy in the political discussion so far. It is striking that more than 70 per cent of the interviewees supporting this proposal indeed expect the private saving rate to increase as a result of government measures. By contrast, only about 50 per cent of experts supporting saving incentives which are exclusively government-driven expect the private saving rate to increase.

An analysis differentiated by investor groups shows that the response frequency was largely consistent. Greater polarization only prevails among experts from the insurance industry. In their case, also more than half of the respondents indeed expect the saving rate to increase as a result of government measures. However, the share of analysts believing the effects of the saving promotion programme to be negligible is twice as high as the average of the entire random sample.

Contact

Dr. Peter Westerheide, E-mail: westerheide@zew.de