Household Saving Behavior and the Effect of Income Growth: Evidence from Korean Household Survey Data

Abstract

In this paper the behavior of the household saving rate is investigated. The life-cycle hypothesis of saving is tested with pooled cross-age time series data of Korean household survey data from 1977 to 2002. The investigation reveals that real saving rates increase when the duration of life span and per household real disposable income rise, whereas they decrease when the growth rate of income and net worth-to-GDP ratio rises. The elasticities with respect to the lifetime horizon and in the growth rate of real disposable income are 0.58 and -0.03, respectively. The younger and the older age dependency ratios have insignificant effects on household saving rate behavior.