Pattern and Determinants of Household Savings in Odisha: An Empirical Analysis of Censored Data Using a Tobit Model

Abstract

The virtuous cycle of higher savings, capital formation, output expansion and higher income generation underscores the role of higher savings in achieving and sustaining higher economic growth. This becomes more relevant for an economically weaker state like Odisha, which needs to sustain high economic growth, having important implications for poverty reduction and improving inter-state economic disparity in the entire country. In this context, empirical analysis of the pattern of household savings in Odisha and the role of its various socioeconomic-demographic determinants become important. In the absence of reliable official data on household savings in Odisha, the present study undertook a household survey to understand the pattern of household savings in Odisha and assess the role of its various determinants. The study employed Tobit model which is most suitable to analyze the saving behavior of the sample households, as some of them reported ‘nil’ savings. The estimated results revealed that along with household income, factors such as education, and nuclear family structure were statistically significant in promoting household savings. Based on the empirical analysis, relevant policy implications are derived, which will be critical for improving household savings in particular and promoting overall economic welfare in general.