We use the Armenian Integrated Living Conditions Survey (ILCS) from 2004, 2006, 2008 and 2010 to test equation (1). These are a set of cross-sectional surveys examining household income and spending behavior, as well as collecting a comprehensive range of variables measuring household characteristics, **x** .<sup>9</sup> Savings rates are imputed from household diaries by taking the difference between reported household income and detailed consumption records observed over a one month period (focusing on disposable income, and purchases of food and consumer durables). It is important to note that both income and consumption exclude the purchase or sale of lumpy goods such as real-estate, land, vehicles or electro-domestic appliances. This is in accordance with prior studies on the microeconomic determinants of savings (see for example Kulikov et al., 2007, pp. 12-13 or Denizer et al., 2002). A small number of respondents are discarded either due to zero reported income or consumption values. The monthly savings rate is also capped at -150 percent and (by definition) 100 percent in order to limit the effects of large outliers, which likely represent families with incomplete income entries, incomes which vary widely between months, or who are spending down accumulated wealth. These observations represent 2 to 6 percent of the sample depending on the survey year.<sup>10</sup> Table 6 presents descriptive statistics of nominal household income, consumption, savings and savings rate by survey year. Growth in reported household income and savings rates is seen in all periods except for a slight decline in income between 2008 and 2010. Gross savings peak in 2006 (in line with the macroeconomic evidence) before declining sharply in 2008. The inclusion of nominal household data rather than inflation-adjusted figures results in steadily rising income and consumption, at least in part due to the effect of inflation. The ratio of these variables however would be expected to remain constant despite inflation, suggesting a rising level of household thrift. Appendix 2 provides an inflation-adjusted version of these results, showing that savings rate do increase despite lower levels of (real) income. This is particularly noteworthy in 2010.

**Table 6: Monthly Household Income, Consumption and Saving – Means and Standard Deviations**

|**Value (drams)**|**2004 **|**2006**|**2008**|**2010**|
|---|---|---|---|---|
|**Y**|89887.63<br>(303483.9)|109722.1<br>(243930.9)|119479.1<br>(175245.5)|118811.7<br>(206286.5)|
|**C**|57329.02<br> (50038.23)|66440.94<br>(54592.61)|83332.32<br>(61448.48)|81107.57<br>(59158.89)|
|**S**|32558.62<br>(299965.9)|43281.21<br>(240259.7)|36158.46<br>(165750.8)|37698.4<br>(200274.1)|
|**Savings Rate**|0.0845<br>(0.526)|0.116<br>(0.508)|0.146<br>(0.463)|0.172<br>(0.452)|
|**N (Households)**|6122|4752|7545|7453|

Source: Authors’ calculation using ILCS data.

> 9 In two of the survey years under study, the ILCS directly asks households to describe their saving behavior. However we do not use this variable in the analysis for two reasons. Firstly given that it has not been consistently collected in all the surveys, the results cannot be compared over time. Secondly, including this variable will make it difficult to compare the findings with other savings determinants studies.  We however consult these results as a consistency check of imputed values.

> 10 Later, least absolute deviations (LAD) results of the baseline model are examined which include these excluded outliers.  LAD is much less sensitive to extreme values than OLS, allowing for the generation of estimates with less concern for households with high rates of dis-saving.

11