Economic and demographic influences on household saving in urban Kenya
Abstract
This thesis investigates the impact of social, economic,
and demographic influences on the level and composition of
Kenyan household saving. While most economists would agree that
the size and age structure of the household affect household
saving and consumption behavior, few saving studies introduce
household size and composition as separate independent variables.
Instead, studies generally include saving in either per capita
or per adult equivalent form. The demographic factors examined
The empirical work used the 1968-1969 Kenyan household
in this study include family size, family structure, age, education,
and urbanization. Equations were estimated with various
demographic specifications: the number of children included in
dummy form, children differentiated by age and sex, and various
equivalent-adult measures.
/ budget data which provides comprehensive expenditure and income
information on 1,146 urban households. The saving models were
fitted using "single-equation ordinary least squares estimation
and, when necessary, appropriate adjustments were made for
heteroskedasticity.
There are five main empirical findings of the thesis.
First, income was ~ far the most significant factor in deter-
mining urban Kenyan household saving. Saving was an increasing
but nonlinear function of income. Second, the Modigliani-
Brumberg-Ando life-cycle hypothesis does not apply to Kenyan
saving behavior. Third, contrary to most studies of the impact
of children on saving and/or consumption which suggest that
additional children have negative effects on saving irrespective
of family size, it was found that saving is not differentially
affected by additional children after the second child. Fourth,
the extended-family institution has a significant depressing
effect on household saving. Finally, none of the adult equivalency
weights yielded an adequate approximation to the
impact of family structure on household saving.
Concomitant with economic growth, the literacy rate rises,
the percent of the population living in urban areas increases,
family size decreases, family structure changes from the extended
family to the nuclear family, and average incomes increase. The
direct effects of these changes on household saving for urban
Kenya were explored. The study found that if increased monetized
saving is considered an important goal and this is used as a
single criterion for determining economic policy, then attention
should be focused on increasing family income. Altering family
size, improving literacy rates, and increasing urbanization will
not directly alter the level of Kenyan household saving significantly.
These factors, however, may indirectly have impacts on
household saving, particularly through their impact on income.
These indirect effects are not revealed in our single-equation
model.
Citation
Doctor Of Philosophy, Duke University ,1976Publisher
University of Nairobi. Department of Economics, Duke University