CULTURE AND SAVINGS: WHY DO ASIANS SAVE MORE?

Abstract

It is a basic consensus that culture affects savings, but the empirical evidence is inadequate. This paper investigates the relationship between culture and savings by using the Hofstede cultural indices, and macro data across 48 countries over the period 1990–2013. The results show that country-fixed effects are highly significant, even if traditional variables are controlled for. We discover that culture can explain much of these individual effects and thus is very important in explaining differences in savings across countries. We use the method of Relative Importance Analysis (RIA) to measure the relative importance of the various cultural dimensions in affecting saving rates. We find that culture-related variables are among the most important saving determinants, along with other variables more commonly used in the economics literature, such as economic growth, social security, and demographics.