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Life Cycle, Mortgage Payment, and Forced Savings

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Abstract

A common puzzling phenomenon over the household survey of Taiwan is that the renters' saving rate is higher than that of the owners', while the latter has a higher average income than the former. One reason for this feature is that certain housing owners have to pay a greater amount of mortgage payment that is not included in saving. And on the other hand, the saving decision is correlated with the tenure decision, while the tenure decision is also correlated with the household's life cycle, in addition to income. And therefore, when one tries to estimate the correct saving rate, he or she has to consider the household's life cycle as well. In this study, we apply a data set of the household survey of Taiwan to investigate the correlation of life cycle, mortgage payment, and forced savings. First of all, we estimate the saving rate in a traditional way, and then estimate the saving rate after the adjustment of mortgage payment. To figure out the correct saving rate with the tenure decision, we evaluate different households' saving behaviors according to different cohorts, and consequently, we could check how life cycle plays its role in this model. And our finding is, that for every cohort, the forced savings is significant for owners with mortgage and for renters as well.

Suggested Citation

  • Chu-Chia Lin & Chien-Liang Chen & Sue-Jing Lin, 2000. "Life Cycle, Mortgage Payment, and Forced Savings," International Real Estate Review, Global Social Science Institute, vol. 3(1), pages 109-141.
    • Handle: RePEc:ire:issued:v:03:n:01:2000:p:109-141
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    Cited by:

    1. Negrusa, Brighita & Oreffice, Sonia, 2010. "Sexual Orientation and Household Savings: Do Homosexual Couples Save More?," IZA Discussion Papers 4961, Institute of Labor Economics (IZA).
    2. Brighita Negrusa & Sonia Oreffice, 2011. "Sexual orientation and household financial decisions: evidence from couples in the United States," Review of Economics of the Household, Springer, vol. 9(4), pages 445-463, December.

    More about this item

    Keywords

    Life Cycle; Mortgage Payment; Forced Savings;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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