Migrant's savings: the relationship with their degree of assimilation into the host society

Purpose: This paper investigates to what extent the saving behaviour of immigrants could be explained by their degree of assimilation into the host society. The convergence over time of the immigrant’s labour market performance (wages and employment) to that of natives is generally viewed as a measure of their economic assimilation which may provide an explanation for savings differentials together with social, demographic and cultural aspects inherent to migrant and their origins. Key literature / theoretical perspective: Several studies have analysed the outcomes of the assimilation process, either wages changes over time as Chiswick (1978) and Borjas (1985, 1995) or wages and employment together as outcomes of the assimilation process (Antecol et al, 2006). Although there are quite a lot of studies about economic assimilation not much is known about the relationship with migrants’ savings behaviour and to what extent they can be related. The greater income uncertainty faced by migrants and difficulties to access welfare benefits in the host country are some of the theoretical explanations (Dustmann, 1997) for the migrants-natives differential in precautionary savings. As income uncertainty tends to decrease with time in the host country, it can be argue that migrants also gain more experience and assimilate into the labour market as time goes by, therefore they may adjust their savings behaviour. Design/methodology/approach: Using two waves of the Household Income and Labour Dynamics in Australia (HILDA) Survey, I have explored the savings behaviour of immigrants in Australia and the relationship with their degree of assimilation into the host society. Given the longitudinal characteristics of the HILDA Survey, I have constructed a measure of savings as the change in wealth between the two waves (2002 and 2006) and relate it to household characteristics and also an explanatory variable that reflects the predicted probability of being assimilated using a two-steep estimation methodology. Research limitations/implications: HILDA Survey collects information about economic and subjective well-being, labour market dynamics and family dynamics. The wave 1 panel consisted of 7,682 households and 19,914 individuals which are followed over time. One of the main limitations of the study arises from the fact that immigrants are under-represented on the survey (25% of the total responding persons) which implies that inferences should be treated carefully if generalized to the complete population of immigrants in Australia. Practical and social implications: Migrants’ wealth accumulation or their savings behaviour together with their integration into the Australian society are key policy issues since a great proportion of the Australian population is foreign born. Since immigration policy has focused on attracting skilled migrants, this study contributes to gain some light differentiating whether the effect on wealth accumulation is a result of better assimilation of migrants or just a consequence of successive cohorts that are better skilled therefore with better labour market outcomes and wealth accumulation.