Impact of COVID-19 on the saving decision under income uncertainty among self-employed in Saudi Arabia : an analysis of the precautionary saving theory

Abstract EN

The pandemic COVID-19 has brought the world to a standstill.

Under these circumstances, where the future is nearly unpredictable, the global financial and economic market is experiencing unprecedented effects.

In the wake of such uncertainty, this study investigates precautionary saving trends among self-employed households that are affected socially and financially by the pandemic of COVID-19 in Saudi Arabia.

Using Saudi Self-employment Saving and Spending Survey (SSSSS), we estimate whether precautionary saving induced by uncertainty regarding future income affects individuals differently depending on different demographic characteristics.

Previous researches point to contradictory results regarding precautionary saving theory; however, this study attempts to study precautionary saving trends under the unique situation presented by COVID-19.

Results indicate that gender and non-gender determinants motivate the self-employed to save more during a pandemic which provides a direct measure of precautionary saving and indicates how the self-employed respond to heightened uncertainty about their future income.

The main contribution of this study is to the literature on the effect the current pandemic has on self-employed workers in Saudi Arabia with respect to future income uncertainty that may affect future generations.