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Determinants of Household Savings

Determinants of Household Savings

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Published by: qazikhurramali on Apr 01, 2010
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01/31/2013

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Research Project
Determinants of Household Savings
Submitted to :Dr.M.Aslam ChauhdaryM.B.Econ (4
th
Semester)
DEPARTMENT OF ECONOMICSUNIVERSITY OF THE PUNJAB
INTRODUCTION
 
Current income minus spending on current needs is called saving.
That part of disposable income not spent on current consumption; disposable income lessconsumption is saving.
Household saving is defined as household disposable income lessconsumption. Household income consists primarily of the compensation of employees,self-employment income, and transfers.Economist have identified three broad reasons for saving. First, people save to meet long –term objectives, such as comfortable retirement. By saving some part of their incomeduring working years, they live better after retirement than if they do not save and dependon their pension. The other objectives may include college tuition for one’s children and purchase of home or car. These needs occur at different stages in one’s life, economistcall this type of saving life-cycle saving.A second reason to save is to protect oneself against unexpected stages;the loss of a job or a health problem. Saving for protection against emergencies is called precautionary saving.A third reason to save is to save money foe one’s children asinheritance. Saving for the purpose of leaving inheritance is called bequest saving.Bequest saving is an important part of overall saving.People do not mentally separate their saving into these categories,these reasons motivate the savers to save.The saving rate Pakistan is not as much high as it should be in case of developingagriculture economy.2
 
There is a statistical overview of household saving in Pakistan.The statistic compiled by the household integrated economic survey reported that 54.7% of household in Pakistan earn up to Rs. 2500 monthly 31.9% earn between Rs.2501 toRs. 5000 monthly and 13.4% earn more than Rs.5000.It means majority of the rural population fall in the income group category earning from 1000 to 2500.MethodologySimple OLS regression model is used to test this hypothesis. . To provide the complete picture of the impact of income, interest rate and inflation on saving the model isestimated.3

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