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Seoul Journal of Economics - Vol. 16 , No. 3
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Seoul Journal of Economics - Vol. 16, No. 3, pp. 323-341
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2003
Received 05 Feb 2004 Revised 28 Apr 2004

Household Saving Behavior and the Effect of Income Growth: Evidence from Korean Household Survey Data
Sung Yeung Kwack
Professor of Economics, Howard University, Washington, D.C., 20059 (skwack@fac.howard.edu)

JEL Classification: D1, E21, J1

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.

Keywords: Saving, Growth and demography, Korea
Acknowledgments

I thank Peter Clark and John Bennett for suggestions. This paper is a modified and selected portion of the paper, Kwack (2003), that I presented at the KDI-KAEA conference held at KDI in July 2003. The version published here shows the theoretical and empirical underpinning for this type of study. The Revised Version of the full paper, Kwack (2004), will be forthcoming in the KDI Journal of Economic Policy, June 2004. It includes the complete data, tables, and other related subjects such as dependency ratio effects for those who are interested.

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