Dependency rates, poverty and saving rates in the LDCs: evidence from cross-sectional household data in Tanzania

Development economics literature attributes poor capital accumulation in the least developed countries to, amongst others, high birth rates that adversely affect savings for investment by increasing the dependent population. This article presents empirical evidence on the influence of dependency rates and poverty on savings in 256 peasant households in three agricultural districts – Arumeru, Mbulu, and Babati – in northern Tanzania. The pooled regression results demonstrate that the dependency rates do not unambiguously exert negative and significant influence on savings. On the contrary, the dependent population appears to exert a statistically significant positive influence on savings in poor households and a positive but insignificant influence on savings in rich households. Moreover, the results demonstrate that the poor are not ‘too poor to save’, rather, they save less. Accordingly, income is a determinant of savings in rich households but not in poor households where wealth, measured by land cultivated, significantly influences saving capacities. Generally, the results suggest that dependent population may, up to a certain optimal size, be instrumental to saving in rural households, and that instruments to mobilize rural savings should be targetted at rich households and complemented by policy measures to increase the saving capacities of poor households. Bibliogr., notes, ref., sum. in English and French.

Title: Dependency rates, poverty and saving rates in the LDCs: evidence from cross-sectional household data in Tanzania
Author: Ndanshau, Michael O.A.
Year: 1998
Periodical: African Review of Money, Finance and Banking – Supplement to ‘Savings and Development’
Issue: 1-2
Pages: 85-96
Language: English
Geographic term: Tanzania
External link: https://www.jstor.org/stable/23026305
Abstract: Development economics literature attributes poor capital accumulation in the least developed countries to, amongst others, high birth rates that adversely affect savings for investment by increasing the dependent population. This article presents empirical evidence on the influence of dependency rates and poverty on savings in 256 peasant households in three agricultural districts – Arumeru, Mbulu, and Babati – in northern Tanzania. The pooled regression results demonstrate that the dependency rates do not unambiguously exert negative and significant influence on savings. On the contrary, the dependent population appears to exert a statistically significant positive influence on savings in poor households and a positive but insignificant influence on savings in rich households. Moreover, the results demonstrate that the poor are not ‘too poor to save’, rather, they save less. Accordingly, income is a determinant of savings in rich households but not in poor households where wealth, measured by land cultivated, significantly influences saving capacities. Generally, the results suggest that dependent population may, up to a certain optimal size, be instrumental to saving in rural households, and that instruments to mobilize rural savings should be targetted at rich households and complemented by policy measures to increase the saving capacities of poor households. Bibliogr., notes, ref., sum. in English and French.