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Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently?

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Abstract

The aim of this paper is to add to the understanding of saving decisions by households. The saving behaviour of households is found to differ depending on the birth cohort of the household head. This paper seeks to explain why this pattern might exist. It is based on an analysis of synthetic cohorts derived from unit record data taken from the Household Economic Survey (HES) for the March years 1984 to 1998. The need to use synthetic cohorts arises as the HES is not a longitudinal panel survey, but rather a time series of independent cross-sectional samples. We use a range of regression models to separate out the effect of age, birth-year cohort and year on saving rates. The typical saving rates for the cohorts born between 1920 and 1939 are found to be significantly lower relative to the younger and older cohorts studied. This pattern of cohort effects is robust to the inclusion of conditioning variables; to the trimming from the sample of households with either negative or very large ratios of savings to consumption, and to different definitions of saving. Some exploratory investigation supports the hypothesis that changes in the economic and policy environment help explain the different saving behaviour of different birth cohorts. Tentative results suggest that more ?favourable environments are associated with lower rates of lifetime saving.

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  • Grant M Scobie & John K Gibson, 2003. "Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently?," Treasury Working Paper Series 03/32, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:03/32
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    File URL: https://treasury.govt.nz/sites/default/files/2007-09/twp03-32.pdf
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    Cited by:

    1. Janice Burns & Maire Dwyer, 2007. "Households'attitudes to savings, investment and wealth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, December.
    2. Mark Vink, 2014. "Intergenerational Developments in Household Saving Behaviour," Treasury Working Paper Series 14/23, New Zealand Treasury.
    3. Majid Einian & Masoud Nili, 2020. "Excess sensitivity and borrowing constraints: Evidence from Iranian households," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 28(1), pages 137-160, January.
    4. Olivia S Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006. "Financial Innovation for an Ageing World," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Anna Park & Daniel Rees (ed.),Demography and Financial Markets, Reserve Bank of Australia.

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    More about this item

    Keywords

    Household saving rates; cohort effects; New Zealand; economic and social policies;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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