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Socio-economic Characteristics and Household Savings: An Analysis of the Households' Saving Behaviour in Pakistan

  • Nadeem A. Burney

    (Pakistan Institute of Development Economics, Islamabad.)

  • Ashfaque H. Khan

    (Pakistan Institute of Development Economics, Islamabad.)

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    Domestic resource mobilization is one of the key determinants of sustained economic growth. Pakistan's performance with regard to domestic resource mobilization has been poor despite maintaining a respectable economic growth rate. Why is the savings rate so low in Pakistan? In this paper we analyse the household savings behaviour in Pakistan, using micro level data of the Household Income and Expenditure Survey (HIES) for the year 1984-85. Three different non-linear savings functions attributed to Keynes, Klein, and Landau are estimated separately for the urban and the rural households, using the Ordinary Least Squares (OLS) technique. It is found that the average income and saving of an urban household are considerably higher than those of overall Pakistan or a rural household. However, contrary to the general belief, it is found that the propensity to save of the rural households is much higher than that of their urban counterparts. The dependency ratio and the various categories of education are found to have a negative influence on household savings. No systematic relationship is found between savings and the employment status and occupation of the household head. It is found, however, that saving increases with age but tends to decline when the age crosses a certain limit - a finding consistent with the Life Cycle Hypothesis.

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    Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

    Volume (Year): 31 (1992)
    Issue (Month): 1 ()
    Pages: 31-48

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    Handle: RePEc:pid:journl:v:31:y:1992:i:1:p:31-48
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    1. Adams, Nassau A, 1971. "Dependency Rates and Savings Rates: Comment," American Economic Review, American Economic Association, vol. 61(3), pages 472-75, June.
    2. Gupta, K L, 1970. "On Some Determinants of Rural and Urban Household Saving Behaviour," The Economic Record, The Economic Society of Australia, vol. 46(116), pages 578-83, December.
    3. White, Halbert, 1980. "Using Least Squares to Approximate Unknown Regression Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 149-70, February.
    4. Kelley, Allen C, 1988. "Population Pressures, Saving, and Investment in the Third World: Some Puzzles," Economic Development and Cultural Change, University of Chicago Press, vol. 36(3), pages 449-64, April.
    5. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-96, December.
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