Globalization and Household Saving: Is There a Link?

Abstract

This paper proposes that globalization can affect household saving in the long run in a number of ways. Social interactions between different cultures can induce value changes, which can result in shifts in consumption and saving behavior. International trade allows consumers to have easier access to status goods, stimulating consumption and dampening saving. Extending from Veblen’s conspicuous consumption theory, saving may also decrease when globalization leads to greater population mobility and fosters urbanization, thus enhancing the importance of consumption as a way to display wealth. In addition, financial globalization reduces credit constraints and allows households to save less. Using cross-country data from the United Nations, the OECD, and other sources, this paper finds evidence that household saving declines as globalization deepens, especially in the social and cultural dimensions.

Keywords: household saving, globalization, conspicuous consumption, culture

JEL Classification: E21, F69