Precautionary savings by natives and immigrants in Germany

Yu Zhu (1) , Matloob Piracha (1)

1 School of Economics

This paper 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 difference-in-differences 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 much 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.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Yu Zhu, Matloob Piracha. Precautionary savings by natives and immigrants in Germany. Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.566202⟩. ⟨hal-00718702⟩