Socio-economic Characteristics and Household Savings: An Analysis of the Households' Saving Behaviour in Pakistan

Abstract

Domestic resource mobilization is one of the key determinants of sustained economic growth. Pakistan's perfonnance with regard to domestic resource mobilization has been poor despite maintaining a respectable economic growth rate. Why is the savings rate so low in Pakistan? In this paper we analyse the household savings behaviour in Pakistan, using micro level data of the Household Income and Expenditure Survey (HIES) for the year 1984-85. Three different non-linear savings functions attributed to Keynes, Klein, and Landau are estimated separately for the urban and the rural households, using the Ordinary Least Squares (OLS) technique. It is found that the average income and saving of an urban household are considerably higher than those of overall Pakistan or a rural household. However, contrary to the general belief, it is found that the propensity to save of the rural households is much higher than that of their urban counterparts. The dependency ratio and the various categories of education are found to have a negative influence on household savings. No systematic relationship is found between savings and the employment status and occupation of the household head. It is found, however, that saving increases with age but tends to decline when the age crosses a certain limit - a finding consistent with the Life Cycle Hypothesis.

Determinants of Rural Household Savings Behaviour: The Case of Tomato Farmers in Ghana

“…A positive and statistically significant coefficient of 1 in Equation (8) and 1 in Equation (9) would support the traditional Keynesian wisdom that equalization of income distribution increases aggregate consumption (Burney and Khan, 1992). In order to test the hypothesis of linear versus nonlinear relationship between savings and income, Landau (1971) suggested the functional form of Eq.…”

“…However, the possibility of encountering problems with heteroscedasticity of the estimates of the coefficients of 1 , 2 and 3 make Equation (7) equally unsuitable. One way according to Burney and Khan (1992), to avoid the problem of heteroscedasticity is to express savings as a percentage of income as given by Eq. 8.…”

Household Savings in Turkey: Evidence From Microdata

“…In micro level data based studies, age, education, income, household size, gender, location are used as a standard set of observable variables in order to determine the effect of heterogeneity of household on savings Burney and Khan (1992) Gibson and Scobie (2001), Guariglia and Kim (2004), Foley and Pyle (2005), Orbeta (2006), Szekely and Attanasio (2000), Chamon and Prasad (2008).…”

Demographic Dividend or Demographic Threat in Pakistan

“…The saving rate, however, continues to show an almost horizontal trend over the years [Pakistan (2006); State Bank (2006)]. Household income has been found to be the prime factor influencing saving behaviour in Pakistan and various studies found a strong inverse relation between dependency ratio and savings in the country [Ahmed and Asghar (2004); Khan and Nasir (1999); Burney and Khan (1992); Siddique and Siddique (1993);and Khan, Hasan, and Malik (1992)]. …”