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Household Saving Behaviour in New Zealand: A Cohort Analysis

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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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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-18/twp01-18.pdf
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Bibliographic Info

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
Date of revision:
Handle: RePEc:nzt:nztwps:01/18

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Keywords: Household saving; lifecycle; age; cohorts;

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References

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  1. Jappelli, Tullio, 1999. "The Age-Wealth Profile and the Life-Cycle Hypothesis: A Cohort Analysis with Time Series of Cross-Sections of Italian Households," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 57-75, March.
  2. Christina Paxson, 1995. "Saving and Growth: Evidence from Micro Data," NBER Working Papers 5301, National Bureau of Economic Research, Inc.
  3. Jagadeesh Gokhale & Laurence J. Kotlikoff & John Sabelhaus, 1996. "Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 315-407.
  4. Orazio P. Attanasio & Hilary W. Hoynes, 1995. "Differential Mortality and Wealth Accumulation," NBER Working Papers 5126, National Bureau of Economic Research, Inc.
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  6. Orazio P. Attanasio, 1993. "A Cohort Analysis of Saving Behavior by U.S. Households," NBER Working Papers 4454, National Bureau of Economic Research, Inc.
  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.
  8. Iris Claus & Grant Scobie, 2001. "Household Net Wealth: An International Comparison," Treasury Working Paper Series, New Zealand Treasury 01/19, New Zealand Treasury.
  9. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 859-71, September.
  10. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series, New Zealand Treasury 00/16, New Zealand Treasury.
  11. 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.
  12. Orazio Attanasio & James Banks, 1998. "Trends in household saving: a tale of two countries," IFS Working Papers, Institute for Fiscal Studies W98/15, Institute for Fiscal Studies.
  13. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, Elsevier, vol. 30(1-2), pages 109-126.
  14. Haddad, Lawrence, 1999. "The income earned by women: impacts on welfare outcomes," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 20(2), March.
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  16. OR Attanasio & J Banks, 2001. "The assessment: household saving - issues in theory and policy," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 17(1), pages 1-19, Spring.
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Citations

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Cited by:
  1. Guyonne Kalb & Rosanna Scutella, 2004. "Wage and employment rates in New Zealand from 1991 to 2001," New Zealand Economic Papers, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(1), pages 21-47.
  2. Christopher Ball & John Creedy, 2014. "Population ageing and the growth of income and consumption tax revenue," New Zealand Economic Papers, Taylor & Francis Journals, Taylor & Francis Journals, vol. 48(2), pages 169-182, August.
  3. Luca Pieroni & David Aristei, 2006. "Regional Differences in Growth Rates: A Microdata Approach," ERSA conference papers ersa06p799, European Regional Science Association.
  4. Davide Aristei & Federico Pierali & Luca Pieroni, 2007. "Cohort, Age and Time Effects in Alcohol Consumption by Italian Households: a Double-Hurdle Approach," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 30/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  5. Iris Claus & Grant Scobie, 2001. "Household Net Wealth: An International Comparison," Treasury Working Paper Series, New Zealand Treasury 01/19, New Zealand Treasury.
  6. El Mekkaoui de Freitas, Najat & Mage-Bertomeu, Sabine & Arestoff, Florence & Abdelkhalek, Touhami, 2010. "A microeconometric analysis of household savings determinants in Morocco," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/12164, Paris Dauphine University.
  7. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series, New Zealand Treasury 09/04, New Zealand Treasury.
  8. Agnese Bicevska & Aleksejs Melihovs & Krista Kalnberzina, 2009. "Savings in Latvia," Discussion Papers, Latvijas Banka 2009/01, Latvijas Banka.
  9. Touhami ABDELKHALEK & Florence ARESTOFF & Najat EL MEKKAOUI DE FREITAS & Sabine MAGE-BERTOMEU, 2012. "Les Déterminants De L’Épargne Des Ménages Au Maroc : Une Analyse Par Milieu Géographique," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 195-214.
  10. Verbina, Inna, 2003. "Inconsistency in Savings Pattern: Is there an Endogeneity Bias?," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. Grant M Scobie & John K Gibson, 2003. "Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently?," Treasury Working Paper Series, New Zealand Treasury 03/32, New Zealand Treasury.

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