Migration and savings: a macroeconomic perspective

Tezkan, Chantal; Balleer, Almut (Thesis advisor); Lorz, Jens Oliver (Thesis advisor)

Aachen (2020)
Dissertation / PhD Thesis

Dissertation, Rheinisch-Westfälische Technische Hochschule Aachen, 2020


As a result of the rising interconnection between countries and continents, migration has become an ongoing political and economic issue throughout the world. In Germany, the public perception of immigration rose enormously during the refugee crisis in 2015 as the migration balance drastically increased in the same year. Using German data, this dissertation studies how migration shocks affect the behaviour, and in particular the saving decisions, of private households in a macroeconomic framework, by focusing on the saving heterogeneity between natives and migrants. In the first chapter, the econometric analysis about the saving probability of households from the German Socio-Economic Panel provides interesting insights about the differences between immigrated and native households. The results document that migrants are on average significantly less likely to save a part of their income for future purposes than natives. This gap varies depending on the home country of immigrant households and diminishes for naturalized, hence culturally assimilated, immigrants. The estimations further highlight that refugees have a significantly lower probability to save than other migrants. Immigrants who rather leave their home country for economic reasons are likely to have a higher propensity for consumption smoothing. Hence, cultural factors and the reasons for migration might matter for the extensive savings margin, i.e. the difference in the saving probability between migrant and native households. The second part of this dissertation analyses how an immigration increase affects the saving behaviour of households in a vector autoregression model using aggregated data from the German Socio-Economic Panel. The results emphasize that a migration shock increases the average saving rate of German households, which is rather caused by a rise in the share of forward-looking households than a behavioural change of savers. As a consequence, immigration does not significantly alter the relative income difference between saving and non-saving households. The findings further highlight that the share of forward-looking migrants is not significantly affected by migration shocks, while the percentage of saving natives significantly increases. Hence, native households are more sensitive to changes in the migration balance than immigrated households, which increases the extensive savings margin between both groups. The last chapter investigates how the expectations of investing agents influence their economic behaviour in the presence of a migration shock in a real business cycle model. The simulations in this chapter reveal that the saving behaviour of immigrants matters for the magnitude of the effects. The model predicts that a positive share of saving migrants reduces the investment incentives of forward-looking agents, while it increases their labour supply and the average saving rate in the host country. The saving incentives of immigrants therefore positively affect output per capita, as well as the wages of all labour groups and reduce income inequalities between savers and consumers. The same effects occur for a welfare state with a linearly progressive labour tax, whether integration costs increase government spending or not. Hence, the saving incentives of migrants provide benefits to the host economy.