Precautionary savings by natives and immigrants in Germany

M. Piracha, Y. Zhu

    Research output: Contribution to journalArticle

    9 Citations (Scopus)

    Abstract

    This article analyses the savings behaviour of natives and immigrants in Germany. It is argued that uncertainty about future income and legal status (in case of immigrants) is a key component in the determination of the level of precautionary savings. Using the German dataset, we exploit a natural experiment arising from a change in the nationality law in Germany to estimate the importance of precautionary savings. Using a Difference-in-Differences (DiD) approach, we find a significant reduction in savings and remittances for immigrants after the easing of citizenship requirements, compared to the pre-reform period. Our parametric specification shows that introduction of the new nationality law reduces the gap in marginal propensity to save between natives and immigrants by up to 80%. These findings suggest that many of the differences in terms of the savings behaviour between natives and immigrants are driven by the savings arising from the uncertainties about future income and legal status rather than cultural differences.

    Original languageEnglish
    Pages (from-to)2767-2776
    Number of pages10
    JournalApplied Economics
    Volume44
    Issue number21
    DOIs
    Publication statusPublished - 14 Jun 2011

    Fingerprint

    Immigrants
    Precautionary saving
    Germany
    Nationality
    Savings
    Uncertainty
    Income
    Saving behavior
    Cultural differences
    Difference-in-differences
    Citizenship
    Natural experiment
    Propensity
    Remittances

    Keywords

    • Migrants
    • Remittances
    • Uncertainty

    Cite this

    Piracha, M. ; Zhu, Y. / Precautionary savings by natives and immigrants in Germany. In: Applied Economics. 2011 ; Vol. 44, No. 21. pp. 2767-2776.
    @article{03e5ac07057d45b2b1609c402cb8b36b,
    title = "Precautionary savings by natives and immigrants in Germany",
    abstract = "This article analyses the savings behaviour of natives and immigrants in Germany. It is argued that uncertainty about future income and legal status (in case of immigrants) is a key component in the determination of the level of precautionary savings. Using the German dataset, we exploit a natural experiment arising from a change in the nationality law in Germany to estimate the importance of precautionary savings. Using a Difference-in-Differences (DiD) approach, we find a significant reduction in savings and remittances for immigrants after the easing of citizenship requirements, compared to the pre-reform period. Our parametric specification shows that introduction of the new nationality law reduces the gap in marginal propensity to save between natives and immigrants by up to 80{\%}. These findings suggest that many of the differences in terms of the savings behaviour between natives and immigrants are driven by the savings arising from the uncertainties about future income and legal status rather than cultural differences.",
    keywords = "Migrants, Remittances, Uncertainty",
    author = "M. Piracha and Y. Zhu",
    year = "2011",
    month = "6",
    day = "14",
    doi = "10.1080/00036846.2011.566202",
    language = "English",
    volume = "44",
    pages = "2767--2776",
    journal = "Applied Economics",
    issn = "0003-6846",
    publisher = "Taylor & Francis",
    number = "21",

    }

    Precautionary savings by natives and immigrants in Germany. / Piracha, M.; Zhu, Y.

    In: Applied Economics, Vol. 44, No. 21, 14.06.2011, p. 2767-2776.

    Research output: Contribution to journalArticle

    TY - JOUR

    T1 - Precautionary savings by natives and immigrants in Germany

    AU - Piracha, M.

    AU - Zhu, Y.

    PY - 2011/6/14

    Y1 - 2011/6/14

    N2 - This article analyses the savings behaviour of natives and immigrants in Germany. It is argued that uncertainty about future income and legal status (in case of immigrants) is a key component in the determination of the level of precautionary savings. Using the German dataset, we exploit a natural experiment arising from a change in the nationality law in Germany to estimate the importance of precautionary savings. Using a Difference-in-Differences (DiD) approach, we find a significant reduction in savings and remittances for immigrants after the easing of citizenship requirements, compared to the pre-reform period. Our parametric specification shows that introduction of the new nationality law reduces the gap in marginal propensity to save between natives and immigrants by up to 80%. These findings suggest that many of the differences in terms of the savings behaviour between natives and immigrants are driven by the savings arising from the uncertainties about future income and legal status rather than cultural differences.

    AB - This article analyses the savings behaviour of natives and immigrants in Germany. It is argued that uncertainty about future income and legal status (in case of immigrants) is a key component in the determination of the level of precautionary savings. Using the German dataset, we exploit a natural experiment arising from a change in the nationality law in Germany to estimate the importance of precautionary savings. Using a Difference-in-Differences (DiD) approach, we find a significant reduction in savings and remittances for immigrants after the easing of citizenship requirements, compared to the pre-reform period. Our parametric specification shows that introduction of the new nationality law reduces the gap in marginal propensity to save between natives and immigrants by up to 80%. These findings suggest that many of the differences in terms of the savings behaviour between natives and immigrants are driven by the savings arising from the uncertainties about future income and legal status rather than cultural differences.

    KW - Migrants

    KW - Remittances

    KW - Uncertainty

    UR - http://www.scopus.com/inward/record.url?scp=80051716631&partnerID=8YFLogxK

    U2 - 10.1080/00036846.2011.566202

    DO - 10.1080/00036846.2011.566202

    M3 - Article

    VL - 44

    SP - 2767

    EP - 2776

    JO - Applied Economics

    JF - Applied Economics

    SN - 0003-6846

    IS - 21

    ER -