Household Saving in Colombia: Macroeconomic and Microeconomic Perspectives

Abstract:     
This document describes and analyzes the behavior of household savings and its determinants. It takes into account a long run analysis for the period 1950-2004 based on national accounts data and a short run analysis at a microeconomic level, using the information from the quality of life surveys realized in 1997 and 2003. Based on an analysis of co-integration, we found a long term relationship among the rate of household savings, the Gross Internal Product (GIP) per capita, the direct taxes and a measurement of financial deepening. At microeconomic level, the analysis provides the household saving rates grouped by different socioeconomic characteristics of the households and different definitions of saving related to investment in human capital and the purchase of durables goods. In addition, we present life time profiles of consumption, income and saving from a synthetic cohort technique constructed to overcome the lack of longitudinal information. The results show that the income as much as the consumption registers a behavior of the inverted U, suggesting that in the Colombian case there is no evidence that the Life-Cycle hypothesis should be validated. Finally, differences in comparing information of the household savings at an aggregate level with the obtained from the surveys may be caused by methodology reasons and for changes in the distribution of income and expenditure registered between 1997 and 2003.

Keywords: Household saving, life cycle hypothesis, consumption, Colombia

JEL Classification: D12, D19, E01, E21

Accepted Paper Series