National Culture and the Private Saving Behavior

Description

This study examines whether national culture explains differences in private saving behavior across countries. Prior research has struggled to link culture to saving rates due to measurement challenges, limited data, and endogeneity issues. We address these limitations by using Hofstede et al.’s (2010) six measurable cultural dimensions and a large panel dataset covering 84 countries from 1981 to 2012. We test whether cultural factors influence private saving rates internationally.

rn

We find that East Asian countries have the highest average private saving rates, followed by other Asian countries, while Africa and South America have the lowest. Focusing on four key cultural variables—Confucianism, Long-Term Orientation (LTO), Uncertainty Avoidance (UA), and Indulgence versus Restraint (IVR)—we find that all significantly affect private saving worldwide. High LTO is strongly associated with higher saving levels, helping explain the persistently high saving rates in China, Japan, and other East Asian economies. Low UA further contributes to sustained high saving, even during financial crises. In addition, restrained cultures are linked to higher saving in other Asian countries.