Precautionary Savings by Natives and Immigrants in Germany
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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7906, National Bureau of Economic Research, Inc.
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RWI Discussion Papers
0029, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
- Thomas Bauer & Mathias Sinning, 2011. "The savings behavior of temporary and permanent migrants in Germany," Journal of Population Economics, Springer, vol. 24(2), pages 421-449, April.
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- Bauer, Thomas K. & Sinning, Mathias, 2005. "The Savings Behavior of Temporary and Permanent Migrants in Germany," IZA Discussion Papers 1632, Institute for the Study of Labor (IZA).
- 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.
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