BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 28/2011:
Save or borrow – what determines Russian households’ financial strategies?
Maria Semenova ()
Abstract: This paper examines what influences Russian households’
decisions to save and borrow. We use the 2008 data from the 17th round of
the Russia Longitudinal Monitoring Survey (RLMS-HSE). Our results show that
the determinants of saving and borrowing are not only those suggested by
economic theory but also include psychological and sociological
considerations: smarter respondents, who are satisfied with their lives and
inclined to help other people, are more likely to save. Those who enjoy
stable or improving financial conditions and/or are satisfied with them are
more likely to save and less likely to borrow. Financial literacy, a factor
cited by institutional theory as positive for both saving and borrowing
from banks, lost its significance at the onset of the financial crisis.
Household income, suggested by economic theory as a basis for choosing a
financial strategy, was found to have much less influence on savings and to
have a positive influence on borrowing, confirming the rationing theory
rather than inter-temporal choice theory. Surprisingly, the fear of job
loss does not make people save more, contrary to the precautionary
motive.
Keywords: household; Russia; saving; bank loans; (follow links to similar papers)
JEL-Codes: D14; D91; G21; (follow links to similar papers)
36 pages, November 4, 2011
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