The effects of cultural origin on the saving behavior of immigrants

What is it about?

This study attempts to investigate the effects of cultural origin on the saving behavior of immigrants in the United Arab Emirates (UAE). Using household survey data covering 3206 households, savings rates are found to be remarkably different across households from different countries/regions. Immigrants from developing countries appear to be highly uniform in terms of average household size, age, education and occupation. However, immigrants from Pakistan and India are found to have higher average savings rates than those from Arab countries, although they have relatively lower incomes. This suggests strong cultural effects on savings, a proposition that is generallysupported by the econometric findings of this research.

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Why is it important?

By unscrambling the relation between cultural background and savings behavior, the study contributes to a better understanding of the determinants of savings. Compared to existing research, the study makes a number of departures. First, the study uses a significantly large data set that includes 3206 households of which 72 percent are immigrants from 50 countries. Second, all immigrants come to the UAE for almost exclusively the same purpose of finding a job, and accumulating savings before they return to their home countries. Third, because immigration to the UAE is temporary, even though some immigrants might be in the country for more than 30 years, there is little or no assimilation between immigrants and nationals of the UAE. In fact, although immigrants account for over 70 percent of the total population, there is no culturally dominant group. Finally, and perhaps most importantly, the household data used in this study provide information on both income and consumption. Hence, saving is directly measured as the difference between the two.