SAVINGS-INCOME RELATIONSHIPS IN URBAN PAKISTAN: Evidence from HIES 1979

This paper attempts to provide baseline estimates of savings propensities by various levels and few socio-economic groups from information on 7504 urban families contained in the Household Income and Expenditure Survey (HIES) of 1979. Fitting popular specifications in the literature to a current and residual measure of household savings does not reveal a consistent and unambiguous relationship of increasing marginal propensities with rising income levels. At mean level of income, estimates based on entire data set revealed that the household’s marginal propensity ranged from 0.21 to 0.27. Average propensity to save at 0.056 across all specifications, was more robust. Excluding very low income households, which possibly overstate consumption (about 10 per,cent of the sample), all others displayed more robust marginal and average propensity estimates ranging from 0.18 to 0.21 and 0.077 respectively. Contrary to studies in India, renters (excluding the self-employed group) not only have lower average propensity but a smaller marginal propensity to save than home-owners although the former had an 18 per cent higher per capita income. Income-source criteria were employed to separate self-employed from empl9yee head of households. Regression results indicated that the former’s average and marginal savings propensities were higher than the latter’s though this difference between the two groups was narrower than the one observed in some studies of the U.S.A. and India.