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Determinants of Household Savings: A Cross-Country Analysis

Author

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  • Cajsa Fredriksson

    (Karlstad Business School, Karlstad University)

  • Klaas Staal

    (Karlstad Business School, Karlstad University)

Abstract

This paper analyses determinants of household savings in a model based on an extension of the disequilibrium savings theory. These extensions follow from the life-cycle and permanent-income theories. Based on panel data for 14 countries spanning the period 2000–2018, fixed-effect least squares and two-stage least squares estimation procedures were used. In line with previous studies, there is strong and robust evidence for the hypotheses of disequilibrium savings theory, specifically, positive effects of unanticipated income changes, unanticipated inflation and the lagged savings rate. There is also robust evidence for the income uncertainty hypothesis that uncertainty has a positive effect on savings. The analysis presents some evidence that social security suppresses savings, but finds no significant effects on the interest rate or old-age dependency ratio. Unexpectedly, the participation rate of the elderly has a significant positive effect in some specifications. These findings contribute to the debate on whether and how governments can influence saving behavior.

Suggested Citation

  • Cajsa Fredriksson & Klaas Staal, 2021. "Determinants of Household Savings: A Cross-Country Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(4), pages 257-272, November.
    • Handle: RePEc:kap:iaecre:v:27:y:2021:i:4:d:10.1007_s11294-022-09842-x
    DOI: 10.1007/s11294-022-09842-x
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