As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes.
Stotsky (2006) notes that gender relations may also impact savings behavior, most certainly at the level of the household but also domestically, internationally and with regard to preferences for risk-taking. At the level of the economy, gender-based differences influence domestic savings with implications for investment and economic growth. Furthermore, investment behavior arising from gender-based differences in savings may have implications for exports and imports.
Stotsky (2006) reviews the literature on savings and gender and first highlights the reasons why one might expect the motivation to save to be different in a developing economy context compared to a developed economy context. In the latter, savings help to smooth out consumption over the life cycle and also fulfill bequest, investment and precautionary motives (Stotsky, 2006). Agenor and Montiel (1996) and Gersovitz (1989) suggest reasons why these motivations may not hold as strongly or for different reasons in a developing economy context. First, households are organized differently and usually incorporate a large extended family. Such a scenario might lead to increased savings to facilitate inter-generational well-being, but may also lead to reduced savings as individuals may chose not to save for retirement but depend on income from the next generation. Second, the potential for consumption smoothing is less applicable in a developing economy context where most households are at or below subsistence level. Third, household income may vary significantly overtime making savings behavior less certain. Finally, lack of savings or a low level of savings would limit the households’ ability to borrow.
Seguino and Floro (2003) examine the differences in savings behavior between men and women in a developing economy context. As summarized in Stotsky (2006), Seguino and Floro suggest a number of reasons for why women may have a greater incentive to save compared to their male counterparts.
- A woman’s role as a home-builder suggests that she has a greater incentive to save and for consumption smoothing purposes compared to men who have access to social insurance
- Women are more likely to save for life-cycle purposes given their longer longevity
- Women have stronger bequest motives and are more likely to save for their heirs
Other factors that may contribute to gender-based differences in savings may revolve around differential access to financial markets and financial instruments. Women are less likely to participate in formal financial markets and therefore may save outside of formal markets. As noted by Stotsky (2006), this may have ambiguous effects on savings as price and income effects would offset one another. Women in Bangladesh are unlikely to save large amounts given that they may have to hand it over to male household members (Goetz and Gupta, 1996).
Most of the studies on gender-based differences in savings are from a developed economy context and these also show differences in savings and investment based on gender. For example, Seguino and Floro (2003) using data on aggregate savings ratios from a group of semi-industrialized countries over the period 1975 to 1995 find that women’s wage share relative to men is positive and significantly related to savings. Floro (2001) notes that poor women have a greater propensity to save compared with poor men.