How Do We Value Our Income from Which We Save?
University of Warsaw, Faculty of Economic Sciences Working Paper No. 3
Posted: 25 Apr 2011
Date Written: April 25, 2011
In this paper we measure the probability of a household to fall into one of the groups of households categorized by the subjective perception of income from which households save at different rates. The multinomial logit regression function is used to analyze the degree of satisfaction from disposable income. The variable specified for the valuation of income is income perception, defined as a class of income subjectively perceived as fulfilling the household needs in relation to the current disposable income of the household. Sufficient income is the reference category in the analysis. Factors that determine the perception of income are: gender and education of the household head, family characteristics, source of income, place of residence, and quintile group of disposable income. The predicted values of income perception, obtained from the multinomial logit regression, are related to the saving rates of households. The analysis shows that the saving rates of households are positively correlated not only with the observed values of income perceived as hardly sufficient, sufficient or good, but also with the predicted values of income perception. The research is based on the Household Budget Surveys data for Poland in 2008. The sample size is 37,316 households.
Keywords: household, income, needs, valuation, saving, probability
JEL Classification: D31, D14, D19
Suggested Citation: Suggested Citation