Selected aspects of household savings in Germany : evidence from micro-data

This paper uses household level data from the German Socio-Economic Panel (GSOEP) over the period 1991 to 2008 to analyse the driving factors of movements in the German household savings rate. Specifically, it analyses the impact of the precautionary savings motive and the impact of the 2002 private pension reform (the so-called Riester reform) on households’ savings rate as these factors are among the most discussed in the German context. There is evidence for both factors at work: First, households with a more volatile income stream tend to save more and the extent to which they do depends on their (subjectively assessed) risk aversion. Second, the introduction of the Riester pension scheme in 2002 was associated with a general increase in the household savings rate, both for households that signed up for private pension contracts and for those that did not. This effect is not found for low-income households, thus confirming the findings of other studies.