Impact of Saving on Welfare of Households in Laos

Saving can take various forms and can be classified into three main categories, namely formal, semiformal, and informal saving. At the macro-level, saving can contribute to long-term economic development, such as raising fund for infrastructure development, health and education development. At the micro-level saving can enhance household welfare, support child education, and ensure decent health care and the like. Considering the important role of saving at the micro-level in Laos, the study examines the impact of saving on household welfare. Specifically, the paper focuses on the degree of the effect of saving on household wellbeing (quality of life) and a comparative analysis of households with and without saving. The empirical analysis applies the data of the Lao Expenditure and Consumption Survey 6, conducted in 2018-2019. The primary results indicate that (1) saving contributes to enhancement of household wellbeing; (2) households having a business tend to be better off as compared to those without a business; and (3) education of the head of households is associated with improved welfare. The findings imply the importance of the financial system, including the banking system, in enabling saving and thereby enhancing household wellbeing and the standard of living at the grass-root level