The empirical analysis of precautionary savings based on household level has long suffered from the assumption of no risk-sharing behavior and measurement errors. Using a unique dataset from China Health and Nutrition Survey (CHNS), we provide an explicit estimate of the relative prudence coefficient of a representative consumer in the Chinese community. As the main innovation of this paper, focusing our estimation on the community, rather than individual household level, is motivated by two salient features of Chinese communities: the virtual isolation between the communities and a significant amount of risk-sharing within each community. Averaging consumption growth across individual households in the same community in China's context can reduce measurement errors. We show that the relative prudence coefficient for a community representative consumer is dramatically greater than that of an individual household, which is consistent with the widely agreed belief about the magnitude of risk-aversion in the life-cycle model.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Find related papers by JEL classification: E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)