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Household Saving Behaviour in New Zealand: A Cohort Analysis

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Author Info
John K Gibson
Grant M Scobie () (John K Gibson, Department of Economics, University of Waikato, Private Bag 3105, Hamilton, New Zealand)

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Abstract

This paper seeks to improve our understanding of household saving behaviour. It is based on an analysis of unit record data from March years 1984 to 1998 taken from the Household Economic Survey (HES). There are limitations of the data set but it provides the only available estimates of income and expenditure, from which saving is estimated as a residual. The HES is a series of cross-sectional surveys rather than a true panel, so we construct synthetic cohorts rather than tracking individual households. We use a range of regression models to separate out the effect of age, birth-year cohort and year on saving rates. The typical age profile for savings is hump-shaped, peaks around age 57 and does not become negative at older ages. Such a profile appears to have shifted down for the cohorts born between 1920 and 1939 relative to the younger and older cohorts studied. This pattern of cohort effects is robust to the inclusion of conditioning variables and to the trimming from the sample of households with either negative or very large ratios of savings to consumption. Preliminary investigation supports the hypothesis that changes in the economic and policy environment help explain the different saving behaviour of different birth cohorts. Tentative results suggest that more favourable environments are associated with lower rates of lifetime saving, although more research is needed to confirm this finding.

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Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 01/18.

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Length: 72 pages
Date of creation: 2001
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Handle: RePEc:nzt:nztwps:01/18

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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
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Web page: http://www.treasury.govt.nz
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Related research
Keywords: Household saving lifecycle age cohorts

Other versions of this item:

Find related papers by JEL classification:
D19 - Microeconomics - - Household Behavior - - - Other
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Angus Deaton & Christina Paxson, 2000. "Growth and Saving Among Individuals and Households," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 212-225, May. [Downloadable!] (restricted)
  2. O. Attanasio & H. W. Hoynes, . "Differential mortality and wealth accumulation," Institute for Research on Poverty Discussion Papers 1079-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  3. Tullio Jappelli, 1999. "The Age-Wealth Profile and The Life-Cycle Hypothesis: a Cohort Analysis with a Time Series of Cross-Sections of Italian Households," CSEF Working Papers 14, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
    Other versions:
  4. OR Attanasio & J Banks, 2001. "The assessment: household saving - issues in theory and policy," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 1-19, Spring.
  5. Haddad, Lawrence, 1999. "The income earned by women: impacts on welfare outcomes," Agricultural Economics, Blackwell, vol. 20(2), pages 135-141, March. [Downloadable!] (restricted)
  6. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury. [Downloadable!]
  7. Shorrocks, A F, 1975. "The Age-Wealth Relationship: A Cross-Section and Cohort Analysis," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 155-63, May. [Downloadable!] (restricted)
  8. Orazio Attanasio & James Banks, 1998. "Trends in household saving: a tale of two countries," IFS Working Papers W98/15, Institute for Fiscal Studies.
  9. Paxson, Christina, 1996. "Saving and growth: Evidence from micro data," European Economic Review, Elsevier, vol. 40(2), pages 255-288, February. [Downloadable!] (restricted)
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  10. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September. [Downloadable!] (restricted)
  11. Verbeek, Marno & Nijman, Theo, 1992. "Can Cohort Data Be Treated as Genuine Panel Data?," Empirical Economics, Springer, vol. 17(1), pages 9-23.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Guyonne Kalb & Rosanna Scutella, 2003. "Wage and Employment Rates in New Zealand from 1991 to 2001," Treasury Working Paper Series 03/13, New Zealand Treasury. [Downloadable!]
    Other versions:
  2. Iris Claus & Grant Scobie, 2001. "Household Net Wealth: An International Comparison," Treasury Working Paper Series 01/19, New Zealand Treasury. [Downloadable!]
  3. Luca Pieroni & David Aristei, 2006. "Regional Differences in Growth Rates: A Microdata Approach," ERSA conference papers ersa06p799, European Regional Science Association. [Downloadable!]
  4. Federico Perali & David Aristei & Luca Pieroni, 2005. "Cohort analysis of alcohol consumption: a double hurdle approach," CHILD Working Papers wp09_05, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
  5. Grant M Scobie & John K Gibson, 2003. "Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently?," Treasury Working Paper Series 03/32, New Zealand Treasury. [Downloadable!]
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