Saving and housing of Taiwanese households: New evidence from quantile regression analyses

Considering the possible heterogeneity of saving propensity of the household, this study estimates Taiwan's household saving functions based on quantile regression, focusing on the effects of housing price appreciation in the late 80s on homeowners and renters over past two decades. The empirical results show that evident heterogeneity exists not only in the marginal propensity to save out of income but also in discouragement effect for renters and wealth effect for homeowners across the conditional distribution of savings. Consequently, housing market boom lowers saving propensity for renters in common while homeowners with higher saving rates show larger wealth effect that lead to the redistribution of social welfare eventually. Based on the estimation of quantile regression, this study is a prelude to the estimation of comprehensive conditional household saving functions. Contribution of this study is to provide new evidence on the heterogeneity of household saving propensity that is different from those presented in the existing literature.