Household Savings in Chile: Microeconomic Evidence

Publication Date: 2000
Published by: Banco Central de Chile - Central Bank of Chile
Document Type: Paper

View this Document   Email this Document

Income and education emerge as important determinants of household saving rates

Saving behavior at a micro level in Chile has not been analysed in recent decades. Based on 1988 and 1996-7 Chilean microeconomic evidence (Household Budget Survey), this document presents an analysis of household's saving behavior. The analysis is extended to include broader definitions of saving such as investment in human capital and durable goods purchases.
The paper concludes that:

• Income and permanent characteristics as education are important determinants of household saving rate;
• There is a clear age pattern for saving and although at a first stage of analysis the predictions of the life cycle hypothesis do not seem to hold, demographics corrections change this preliminary conclusion;
• When pensions are not considered income the old age saving is similar to the predicted by the Life Cycle Hypothesis (LCH);
• That household financial expenses have different behavior in different groups, may point to differences in the access to credit and may contribute to the fact the household with more educated head behave closer to the predictions of the LCH;
• When other definitions of saving are considered (e.g. human capital and durable goods) it is found that such savings are important for all quintiles, they have a distinct age pattern and in some groups they totally compensate the negative saving rate of the conventional definition, especially for the latest survey.