Household Savings and Productive Capital Formation in Rural Vietnam: Insurance vs. Social Network

Abstract

In this paper, we investigate the role of the social network nexus and the insurance nexus in determining household savings and productive capital formation in rural Vietnam. We analyze the issue in two dimensions, stocks and flows, and consider the exposure to negative shocks. The instrumental variable method is employed and unlike previous studies, we account for the endogeneity of all concerned variables. The results indicate that the social network nexus has more impacts in "ex ante" rather than in "ex post" households. In both households groups, the effects of the insurance nexus dominate over those of the social network nexus. In the case of the stocks, we also find that the precautionary view holds in liquid assets but not in productive assets.

Applying quantile regression to determine the effects of household characteristics on household saving rates in Vietnam

“…This holds true for the whole sample as well as for urban and rural households. Our results are consistent with the findings of Gries and Dung (2014) for rural Vietnam.…”

“…The gender of the household head is known to be a very common factor affecting household saving behaviour (Abdelkhalek et al, 2010;Gries and Dung, 2014;Minh et al, 2013;Schunk, 2009). In many papers it is found that the saving behaviours of males and females are not homogeneous.…”

The relationship between income inequality and savings: evidence from household‐level panel data in Vietnam

“…From the micro perspective, savings is an important factor of household welfare, understanding the social-economic determinants that prompt households to save is therefore a worthwhile topic of academics and policymakers. Some empirical studies attempt to identify the key influences driving the saving behavior of households in Vietnam, including demographics (Nguyen, Nguyen, Trinh, Phung, & Le, 2013), social capital (Newman, Tarp, & Van Den Broeck, 2014), and social networks and insurance (Gries & Van Dung, 2014). Recently, the growing literature on social status and economic growth has provided several explanations for how and why income inequality can impact on households' savings.…”