DefinePK

Abstract

This study examines the effect of household characteristics on their savings in Pakistan. The models of savings, developed by Keynes, Landau, and Klein, have been estimated using the OLS method. HIICS data from 2015-16 was used for this study. It was observed that an increase in household income raised their savings, while an increase in the average number of dependents per earner decreased household savings. Consistent with the appeal of the lifestyle Income Hypothesis, it was observed that the savings decreased as the age of the Head of a household increased.  However, interestingly, household savings were negatively affected by higher educational achievement of the Head, perhaps due to a lesser reliance on pecuniary savings among the households headed by individuals with superior human capital status. Although the direct effect of education on saving was found to be negative, the indirect effect was positive, because increased educational accomplishment coincided with increased earnings, while increased earnings correspond to increased savings. The effect of household wealth on net lifetime saving was negative, at least in cases of less liquid forms of wealth-property and precious metals.