Household Saving in Chile: Microeconomic Evidence

Abstract

Saving behavior at a micro level in Chile has not been analyzed in recent decades. Based on 1988 and 1996-7 Chilean microeconomic evidence (Household Budget Survey), we present an analysis of household’s saving behavior. The analysis is extended to include broader definitions of saving such as investment in human capital and durable goods purchases. We have learned that both income and more permanent characteristics such as education are important determinants of household saving rate. Furthermore, we find an income/expenditure parallelism and positive saving rates for the elderly. At a first stage of analysis, these facts contradict the predictions of the life cycle hypothesis, but some corrections (using demographic characteristics and a different treatment of pensions) change these preliminary conclusions. The differences in the credit constrains by groups are explored in order to study its likely effects on consumption smoothing. Finally, elderly saving are analyzed focusing on their contradictory effect in macro and micro studies