RDP 2014-03: Household Saving in Australia Appendix D: Quantile Decomposition

An alternative way to decompose the change in the saving ratio between 2003/04 and 2009/10 is a quantile decomposition based on the method of Machado and Mata (2005). This approach allows us to estimate the contribution of model parameters and population characteristics to the change in saving over the entire saving distribution, rather than just at the mean.

Figure D1 shows this decomposition across the predicted saving distribution. Similar to the results from the Oaxaca-Blinder mean decomposition, the model suggests that parameter effects contributed around 4–12 percentage points to the saving ratios between 2003/04 and 2009/10 across the distribution. Changes in characteristics subtracted from saving at the bottom of the distribution, and contributed to saving at the top of the distribution; that is, the characteristics of high savers shifted to make them even higher savers, all else equal, between 2003/04 and 2009/10.