Ethnicity and Household Savings in Indonesia

Ethnicity and Household Savings in Indonesia

Shochrul Rohmatul Ajija, Muhamad Abduh, Wasiaturrahma Wasiaturrahma, Ahmad Hudaifah
Copyright: © 2021 |Pages: 13
DOI: 10.4018/978-1-7998-8049-3.ch009
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Abstract

Household saving is very important, not only for securing the future spending of the family but also for the country's economy. Using the logit analysis on data of The Indonesia Family Life Survey (IFLS) wave three, four, and five, this chapter analyzes factors influencing, especially the role of ethnicity, upon the household savings in Indonesia. The result indicates that gender, location, and level of education are the consistent variables affecting the household saving behaviour in Indonesia across the three wave surveys. Meanwhile, as for the ethnic group variable, there are only Sunda, Batak, and Bima-Dompu that can significantly influence the people's saving behavior across the three wave surveys.
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Literature Review

Generally, saving is defined as money not spent (Popovici, 2012). According to (Akram & Akram, 2015), the determinants of savings are including demographic factors, macroeconomic variables, and financial variables. The Classical Theory stated that savings have a positive relationship with interest rate (Vieneris, 1977; Mishkin, 2010). The high interest rate encourages people to save because they will earn more interest income through savings. According to Keynesian, savings are highly determined by the disposable income or current income (Crouch, 1972). However, Post-Keynesian argued that savings depended on income ambiguously, but they stressed that savings are more influenced positively by one’s income and affected negatively by the consumption at the same time (Grigoli, Herman, & Herbel, 2014).

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