Analyzing the effects of status-seeking behavior on household savings in the Philippines
Date
2017-05-31
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Abstract
Several studies suggest that the increase in the gap between rich and poor households positively affects the aggregate savings as richer households have a higher marginal propensity to save than low income earners. examining the effect of income distribution on regional household savings in
the Philippines, we used pooled cross-sectional data from 1988 to 2012 of 17 regions from the Family Income and Expenditure Survey (FIES). calculating the Gini coefficient and the income ratio of the 10th and 1st deciles as a measurement of income inequality, our regression analysis
suggests that a 0.1 increase in the Gini coefficient results in a 0.61-percentage point increase in the saving rate. Meanwhile, a 1-percentage point increase in the income ratio results in a 0.1-percentage point increase in the saving rate. However, after analyzing the impact of income inequality on the saving rate of the rich and the poor, the results reveal that the rich tend to save, while the poor dis-save, which is contrary to our hypothesis that after satisfying their basic needs, relatively poor households would increase their savings due to status-seeking behavior.
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Keywords
income inequality, household savings