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Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently? - WP 03/32

Publication Details

  • Household Saving Behaviour in New Zealand: Why do Cohorts Behave Differently?
  • Published: Dec 2003
  • Status: Current
  • Authors: Gibson, John K; Scobie, Grant M
  • JEL Classification: E21; J26
  • Hard copy: Available in HTML and PDF formats only.
 

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

New Zealand Treasury Working Paper 03/32

Published December 2003

Authors: Grant M Scobie and John K Gibson

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.

Contents

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Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 Construction of the data and the cohort approach

3 The Model and Results

4 Exploring the Cohort Patterns

5 Conclusions

References

twp03-32.pdf (470 KB) pp. 1–29

List of Tables

List of Figures

Acknowledgements

The authors thank Ivan Tuckwell for his help in preparing the data files and participants in seminars at the University of Waikato and the Treasury. In particular, Bob Buckle and John Creedy have made helpful suggestions.

Disclaimer

The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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