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Precautionary Savings by Natives and Immigrants in Germany

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  • Matloob Piracha

    ()

  • Yu Zhu

    ()

Abstract

This paper analyses the savings behaviour of natives and immigrants in Germany. It is argued that uncertainty about future income and legal status (in case of immigrants) is a key component in the determination of the level of precautionary savings. Using the German dataset, we exploit a natural experiment arising from a change in the nationality law in Germany to estimate the importance of precautionary savings. Using difference-in-differences approach, we find a significant reduction in savings and remittances for immigrants after the easing of citizenship requirements, compared to the pre-reform period. Our parametric specification shows that introduction of the new nationality law reduces the marginal propensity to save gap between natives and immigrants by up to 80%. These findings suggest that much of the differences in terms of the savings behaviour between natives and immigrants are driven by the savings arising from the uncertainties about future income and legal status rather than cultural differences.

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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0821.

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Date of creation: Dec 2008
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Handle: RePEc:ukc:ukcedp:0821

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Keywords: Migrants; Remittances; Savings; Uncertainty;

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References

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  1. Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-67, May.
  2. Thomas Bauer & Mathias Sinning, 2005. "The Savings Behavior of Temporary and Permanent Migrants in Germany," RWI Discussion Papers 0029, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  3. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000. "Do the rich save more?," Finance and Economics Discussion Series 2000-52, Board of Governors of the Federal Reserve System (U.S.).
  4. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  5. Carroll, Christopher D & Rhee, Byung-Kun & Rhee, Changyong, 1994. "Are There Cultural Effects on Saving? Some Cross-Sectional Evidence," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 685-99, August.
  6. Catalina Amuedo-Dorantes & Susan Pozo, 2002. "Precautionary Saving by Young Immigrants and Young Natives," Southern Economic Journal, Southern Economic Association, vol. 69(1), pages 48-71, July.
  7. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
  8. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer, vol. 19(2), pages 227-254, June.
  9. Merkle, Lucie & Zimmermann, Klaus F., 1992. "Savings, remittances, and return migration," Economics Letters, Elsevier, vol. 38(1), pages 77-81, January.
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Citations

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Cited by:
  1. Matloob Piracha & Stephane Mahuteau & Massimiliano Tani, 2010. "Selection Policy and Immigrants’ Remittance Behaviour," Studies in Economics 1003, Department of Economics, University of Kent.
  2. Giulia Bettin & Riccardo Lucchetti, 2012. "Intertemporal Remittance Behaviour by Immigrants in Germany," SOEPpapers on Multidisciplinary Panel Data Research 505, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Hulya Ulku, 2010. "Remitting Behaviour of Turkish Migrants: Evidence from Household Data in Germany," Brooks World Poverty Institute Working Paper Series 11510, BWPI, The University of Manchester.
  4. Borodak, Daniela & Piracha, Matloob, 2013. "Who Moves and For How Long: Determinants of Different Forms of Migration," IZA Discussion Papers 7388, Institute for the Study of Labor (IZA).
  5. Yu Zhu & Zhongmin Wu & Meiyan Wang & Yang Du & Fang Cai, 2011. "Do Migrants Really Save More? Understanding the Impact of Remittances on Savings in Rural China," Journal of Development Studies, Taylor & Francis Journals, vol. 48(5), pages 654-672, June.
  6. Kaczmarczyk, Pawel, 2013. "Money for Nothing? Ukrainian Immigrants in Poland and their Remitting Behaviors," IZA Discussion Papers 7666, Institute for the Study of Labor (IZA).
  7. Collier, William & Piracha, Matloob & Randazzo, Teresa, 2011. "Remittances and Return Migration," IZA Discussion Papers 6091, Institute for the Study of Labor (IZA).
  8. Bettin, Giulia & Paçacı Elitok, Seçil & Straubhaar, Thomas, 2012. "Causes and consequences of the downturn in financial remittances to Turkey: A descriptive approach," Edition HWWI: Chapters, in: Turkey, migration and the EU, pages 133-166 Hamburg Institute of International Economics (HWWI).
  9. Hulya Ulku, 2012. "Remitting Behaviour of Turkish Migrants: Evidence from Household Data in Germany," Urban Studies, Urban Studies Journal Limited, vol. 49(14), pages 3139-3158, November.
  10. Katarzyna Budnik, 2011. "Temporary migration in theories of international mobility of labour," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 42(6), pages 7-48.
  11. Vaira-Lucero, Matias & Nahm, Daehoon & Tani, Massimiliano, 2012. "The Impact of the 1996 US Immigration Policy Reform (IIRIRA) on Mexican Migrants' Remittances," IZA Discussion Papers 6546, Institute for the Study of Labor (IZA).

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