The Substitutability Between Discretionary and Contractual Saving and the ‘Propensity’ to Save Profit and Wage Income in the UK

Abstract

The aim of this paper is to test the substitution hypothesis of saving according to which household regard their contractual saving (eg pension funds and/or corporate retained earnings) as full substitutes for their personal discretionary saving. Also the related hypothesis that households save different proportions out of their profit and wage income. The estimated framework used is a saving function for the household sector which is shown be sonsistent in its estimated form with most comsumption/saving models available today.