Household Savings in Transition Economies

16 Pages Posted: 20 Apr 2016

See all articles by Cevdet Denizer

Cevdet Denizer

Center for Economics and Econometrics; World Bank

Holger C. Wolf

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS)

Yvonne Ying

World Bank - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 2000

Abstract

In Bulgaria, Hungary, and Poland, the higher the relative household income is, the higher the savings rate is. But, surprisingly, savings rates appear to be unaffected by either sector of employment (public or private) or form of employment. Savings rates are significantly higher for households that do not own their own homes or that own few of the standard consumer durables - possibly because, with no retail credit or mortgage markets, households must save to purchase houses and durables.

During the transition from central planning to market economies now under way in Eastern Europe, output levels first collapsed by 40 to 50 percent in most countries, then staged a modest recovery in the last two years. Longer-term revival of growth requires a resumption of investment and thus, realistically, of domestic savings.

To explore the determinants of household savings rates in transition economies, Denizer, Wolf, and Ying studied matching household surveys for three Central European economies: Bulgaria, Hungary, and Poland.

They find that savings rates strongly increase with relative income, suggesting that increasing income inequality may play a role in determining savings rates.

Savings rates are significantly higher for households that do not own their homes or that own few of the standard consumer durables - possibly because, with no retail credit or mortgage markets, households must save to purchase houses and durables.

The influence of demographic factors broadly matches earlier findings for developing countries.

Perhaps surprisingly, variables associated with the household's position in the transition process - including either sector of employment (public or private) or form of employment - do not play a significant role in determining savings rates.

This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the region to understand determinants of savings, at both the household and the aggregate level.

Suggested Citation

Denizer, Cevdet and Wolf, Holger C. and Ying, Yvonne, Household Savings in Transition Economies (March 2000). World Bank Policy Research Working Paper No. 2299. Available at SSRN: https://ssrn.com/abstract=629149

Cevdet Denizer

Center for Economics and Econometrics ( email )

United States
+902123596505 (Phone)
+902122872453 (Fax)

HOME PAGE: http://www.cee.boun.edu.tr

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Holger C. Wolf

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS) ( email )

Washington, DC 20057
United States
202-687-8079 (Phone)
202-687-8359 (Fax)

HOME PAGE: http://georgetown.edu/faculty/wolfhc/

Yvonne Ying (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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