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The savings behavior of temporary and permanent migrants in Germany

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Abstract

This paper examines the relative savings position of migrant households in West Germany paying particular attention to differences between temporary and permanent migrants. Our findings reveal significant differences in the savings rates between German natives and immigrants. If remittances are treated as savings, however, migrants who intend to return to their home country save significantly more than comparable natives. The results of a decomposition analysis indicate that slightly more than half of the differences in the savings rate between Germans and permanent migrants and almost 70% between temporary and permanent migrants can be attributed to differences in observable characteristics.

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Notes

  1. The data used in this paper were extracted from the SOEP Database provided by the DIW Berlin (http://www.diw.de/soep) using the Add-On package SOEP Menu v2.0 (Jul 2005) for Stata(R). SOEP Menu was written by Dr. John P. Haisken-DeNew (john@soepmenu.de). John P. Haisken-DeNew and Markus Hahn supplied the SOEP Menu Plugins used to ensure longitudinal consistency. The SOEP Menu generated DO file to retrieve the SOEP data used here, and any SOEP Menu Plugins are available upon request. Any data or computational errors in this paper are our own. Haisken-DeNew (2005) describes SOEP Menu in detail.

  2. We also ran regressions in which we considered the remittances of permanent immigrants as savings. This procedure did not change our results qualitatively. The estimates are available from the authors upon request.

  3. Note that the decomposition equation may also be written as \( \Delta^{\text{OLS}}_{nm } = (\overline{\mathbf{X}}_n - \overline{\mathbf{X}}_m)\widehat{\beta}_m + \overline{\mathbf{X}}_n (\widehat{\beta}_n - \widehat{\beta}_m).\) We calculated both versions of the decomposition equation. Since we find that the estimates derived from the two equations do not differ substantially from each other, we focus on Eq. 5 throughout the paper.

  4. To account for the variation in return intentions over time, we carried out alternative estimations, restricting the sample of immigrants to those persons who never change their return intention. This restriction reduced the sample to 6,190 (38,258) person-year observations with 1,079 (4,405) immigrants for the years 1993 and 1995 (for the period from 1996 to 2004). The estimates derived from this sample do not differ significantly from those presented in Table 2. They are available from the authors upon request.

  5. The effect of immigration for the average household may be calculated as \(\omega_1 - \omega_0 = (\widehat{\gamma}_0 + \widehat{\gamma}_2 \times 1 + \overline{\mathbf{Z}} \widehat{\gamma}_3 + \widehat{\gamma}_4 \overline{R} + \widehat{\gamma}_5 \overline{YOM}) - (\widehat{\gamma}_0 + \widehat{\gamma}_2 \times 0) = \widehat{\gamma}_2 + \overline{\mathbf{Z}} \widehat{\gamma}_3 + \widehat{\gamma}_4 \overline{R} + \widehat{\gamma}_5 \overline{YOM}\) for the sample of immigrant households (M i  = 1). The average effect of return intentions is given by \(\omega_3 - \omega_2 = (\widehat{\gamma}_0 + \widehat{\gamma}_2 \times 1 + \overline{\mathbf{Z}} \widehat{\gamma}_3 + \widehat{\gamma}_4 \times 1 + \widehat{\gamma}_5 \overline{YOM}) - (\widehat{\gamma}_0 + \widehat{\gamma}_2 \times 1 + \widehat{\gamma}_4 \times 0)= \overline{\mathbf{Z}} \widehat{\gamma}_3 + \widehat{\gamma}_4 + \widehat{\gamma}_5 \overline{YOM}\). The corresponding marginal effects of the Tobit model are p j  − p j − 1 (the probability of being uncensored), e j  − e j − 1 (the conditional expectation), and \(y^*_j - y^*_{j-1}\) (the unconditional expectation) for j = {1,3 }, where \(p_k = \Phi(\omega_k / \widehat{\sigma})\), \(e_k = \omega_k + \widehat{\sigma} \frac{\phi(\omega_k/\widehat{\sigma})}{\Phi(\omega_k/\widehat{\sigma})}\), and \(y^*_k = e_k p_k\) (k = {j, j − 1 }). The authors are grateful to an anonymous referee for this indication.

  6. In order to test whether the effect of the migrant dummy and the interaction terms specified in Eqs. 1 and 2 are jointly significant, we carried out Wald tests for all specifications. In all cases, the coefficients appear to be jointly significantly different from zero.

  7. The underlying estimates of the decomposition analysis in Table 4 are available upon request.

  8. Note that for permanent migrants, differences between Savings rate I and Savings rate IIa are very small, while differences between Savings rate I and Savings rate IIb do not exist (see Table 6 of “Appendix”). For that reason, differences in Savings rate II between natives and permanent migrants are not considered in the decomposition analysis.

  9. This result is in line with our estimates of the determinants of the savings rate, where the existence of children has no statistical significant different impact on the savings rate of immigrant and native households.

  10. See, among others, Fertig and Schmidt (2002) and Riphahn (1998). A survey of the literature is provided by Bauer (2002).

  11. The data are available from the Development Education Program of the World Bank.

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Acknowledgements

We would like to thank Michael Fertig, Jane Friesen, Regina Riphahn, the participants of the IZA Summer School, and three anonymous referees for their helpful comments.

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Authors and Affiliations

  1. RWI Essen, Hohenzollernstr. 1–3, 45128, Essen, Germany

    Thomas K. Bauer & Mathias G. Sinning

  2. Ruhr-University Bochum, Bochum, Germany

    Thomas K. Bauer

  3. IZA, Bonn, Germany

    Thomas K. Bauer & Mathias G. Sinning

  4. Social Policy, Evaluation, Analysis and Research Centre, Research School of Economics, Australian National University, Fellows Road, Canberra, ACT, 0200, Australia

    Mathias G. Sinning

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  1. Thomas K. Bauer
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Correspondence to Thomas K. Bauer.

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Responsible editor: Klaus F. Zimmermann

Appendix

Appendix

Table 6 Definition of savings and remittances
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Table 7 Definition of explanatory variables
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Table 8 Descriptive statistics, SOEP
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Table 9 Descriptive statistics, SOEP
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Bauer, T.K., Sinning, M.G. The savings behavior of temporary and permanent migrants in Germany. J Popul Econ 24, 421–449 (2011). https://doi.org/10.1007/s00148-010-0306-z

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