DOES CULTURE EXPLAIN THE HIGH PRIVATE SAVING BEHAVIOR IN EAST ASIAN COUNTRIES? FURTHER EVIDENCE

Attempts within the prior studies to determine whether the disparities in national saving rates can be explained by cultural attributes have been largely unsuccessful, essentially as a result of the formidable problems of measurement of culture, data availability and endogeneity. We first extend the prior research using the six measurable cultural dimensions of Hofstede et al. [( 2010 ). Culture and Organizations: Software of the Mind, Intercultural Cooperation and Its Importance for Survival, 3rd Edition. New York: McGraw Hill], along with the largest panel database currently available, containing 84 countries over the period 1981–2012, on culture-related variables and saving rates, to test our hypothesis that cultural factors can influence private saving behavior in an international context. We then focus our study on three main cultural variables in East Asian countries — Confucianism, Long-term Orientation (LTO) and Uncertainty Avoidance (UA) — and find that they all have significant impacts on private saving rates around the world. Our findings also potentially solve the puzzle of why China, Japan and other East Asian countries save so much and so persistently since we find that the high LTO measures within these regions determine their high levels of private savings, whilst their low UA measures explain the persistence of their high saving rates, even during a period of financial crisis.