Multiple-Driving Paths of Saving and Investment in Regional Gross Domestic Product of Southern Ethiopia

Abstract

Despite an increase in overall economy of the country, saving and investment is still low. As the result, this study was undertaken to factor out the contribution of savings and investment on the regional economic growth of the study area. Cross-sectional data was used for analysis. The descriptive analysis, Logistic regression model and Heckman two stage selection model were used to properly examine the investigation. Thus, majority of the households saved their money in the formal sector of finance rather than in the informal sectors like Iqube and Edir. The rate of saving is much lower than the rate of non-saving in the study area. In addition to that households have higher expenditure on food items than non-food items in the study area. Therefore, despite the fact that enhancing production have a significant implication on the value of saving and investment, it has been revealed that there are major differences from people to people in the study area. Therefore, the existing rate of saving and investment has lesser contribution in the regional economic growth in the area. Moreover, sex, age, household size and expenditure were key to determine the level of saving money in the study area. Therefore, Improving the investment climate, particularly those relating to security of property, crime, political instability, and macroeconomic instability should be taken into account by the government.