Indian-origin people in UK have same savings habit as India, says LSE study
The study titled The Cultural Origin Of Saving Behaviour establishes a link between culture and saving behaviour, using long-term data to explore the saving habits of migrants, their children and their grandchildren.Updated: Sep 20, 2018 08:39 IST
UK-based children and grandchildren of migrants born in India and elsewhere are influenced by the same savings habits as that of their country of origin, a new study at the London School of Economics says.
Published in the PLOS One journal, the study titled The Cultural Origin Of Saving Behaviour establishes a link between culture and saving behaviour, using long-term data to explore the saving habits of migrants, their children and their grandchildren.
It found that culture impacts on saving behaviour for up to three generations.
“(The) likelihood that Indian origin people report to have saved at the end of the month is roughly 30% for all generations, which closely matches with their home country savings. In other words, India is not an outlier in our analyses,” study co-author Berkay Ozcan writes.
The focus on the UK enabled the researchers to observe people from many different countries of origin in the same environment (the UK) and isolate culture as the factor determining people’s saving habits.
The researchers found that despite living under different economic and institutional conditions — such as a different tax and welfare system — to their country of birth, the money-saving behaviour of migrants and their children and grandchildren still tended to reflect that of their birth country.
For example, the UK-born children and grandchildren of people born in countries with high saving rates, such as China, tended to save at a higher rate. Likewise, the children and grandchildren of those from countries with low-saving rates tended to save at a lower rate.
The researchers suggest this is because different cultures place different levels of importance on saving which leads to ingrained saving behaviours and norms which continue to influence people’s behaviour outside of their birth country.
These norms are then passed down the generations through what the researchers call “intergenerational cultural transmission”, where parents pass their beliefs and values onto their children.
Ozcan adds: “This study is important because it contributes to understanding the determinants of saving behaviour…Our research shows that culture is an important determinant and should be taken into account when designing incentives and policies for saving behaviour.”