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Micro Foundations of Savings Behavior in Urban Pakistan

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  • Shaikh, Salman

Abstract

Savings rate in Pakistan is one of the lowest in the regional countries. As a result, investment to GDP ratio has been dismally low as well. Low investment results in low capital formation and hence lower long term growth and hence low levels of development. The long term growth literature from Harrod (1939)-Domer (1946), Solow (1956) to Romer (1986) is almost unanimous on the role of savings in long term economic growth. There have been studies in past on the macroeconomic determinants of savings in Pakistan. But, few studies have explored micro foundations of savings behavior in Pakistan. This study uses primary data collected through survey questionnaire to study the micro foundations of savings behavior in urban areas of Pakistan. We use descriptive as well as inferential tools for our study. We use LPM, Logit and Probit models to explore the determinants of investment and precautionary motive for savings.

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  • Shaikh, Salman, 2013. "Micro Foundations of Savings Behavior in Urban Pakistan," MPRA Paper 53805, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53805
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    4. Muhammad Farhan & Muhammad Akram, 2011. "Does Income Level affect Saving Behaviour in Pakistan? An ARDL approach to co-integration for empirical assessment," Far East Journal of Psychology and Business, Far East Research Centre, vol. 3(5), pages 62-72, June.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
    6. Shahbaz Nasir & Mahmood Khalid, 2004. "Saving-investment Behaviour in Pakistan: An Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 665-682.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Savings; Intertemporal Consumption; Savings Motive; Investments; Rational Expectations; Asset Markets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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