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Social Norms and Household Savings Rates in China

Author

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  • Yvonne Jie Chen
  • Zhiwu Chen
  • Shijun He

Abstract

We study the effects of Confucian social norms on savings rates in China. In our simple two-period model, parents have the option to invest in either a risk-free asset or their children’s human capital. We assume that the filial piety norms and thus the enforcement mechanisms for supporting old-age parents differ across regions. Consequently, the probability of children’s non-performance of their repayment obligations to parents and the returns parents can expect from investing in their children vary. We test the model predictions using data from the China Household Finance Survey. We find that stronger Confucian social norms reduce the gap in the savings rate between families with sons and with daughters. Modeling default by children as a function of the prevailing social norms gives us the flexibility to study the impacts of declining Confucian influence on consumption–savings trends in China.

Suggested Citation

  • Yvonne Jie Chen & Zhiwu Chen & Shijun He, 2019. "Social Norms and Household Savings Rates in China," Review of Finance, European Finance Association, vol. 23(5), pages 961-991.
    • Handle: RePEc:oup:revfin:v:23:y:2019:i:5:p:961-991.
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    File URL: http://hdl.handle.net/10.1093/rof/rfy029
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    Cited by:

    1. Alfred M. Wu & Kee-Lee Chou, 2021. "Intergenerational Conflict or Solidarity in Hong Kong? A Survey of Public Attitudes Toward Social Spending," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(2), pages 775-798, December.
    2. Jiang, Shuguang & Wei, Qian, 2022. "Confucian culture, moral reminder, and soft corruption," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    3. Ye, Zihan & Zou, Xiaopeng & Post, Thomas & Mo, Weiqiao & Yang, Qianqian, 2022. "Too old to plan? Age identity and financial planning among the older population of China," China Economic Review, Elsevier, vol. 73(C).
    4. Kong, Xiaoran & Xu, Siping & Liu, Ming-Yu & Ho, Kung-Cheng, 2023. "Confucianism and D&O insurance demand of Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    5. Jin, Gan, 2023. "Circle of fortune: The long-term impact of Western customs institution in China," Journal of Development Economics, Elsevier, vol. 163(C).
    6. Xu, Ziyao & Ma, Junfeng & Li, Donghui & Fu, Wentao, 2022. "Religious beliefs and stock market participation: Evidence from urban households in China," Research in International Business and Finance, Elsevier, vol. 63(C).
    7. Manger, Mark S. & Matthews, J. Scott, 2021. "Knowing when to splurge: Precautionary saving and Chinese-Canadians," Journal of Asian Economics, Elsevier, vol. 76(C).
    8. Yong Bian & Xiqian Wang & Qin Zhang, 2023. "How Does China's Household Portfolio Selection Vary with Financial Inclusion?," Papers 2311.01206, arXiv.org.
    9. Zeng, Miao & Du, Jiang & Zhu, Xiaoyu & Deng, Xin, 2023. "Does internet use drive rural household savings? Evidence from 7825 farmer households in rural China," Finance Research Letters, Elsevier, vol. 57(C).
    10. Li, Lingfang (Ivy) & Wu, Yuting & Zhu, Xun & Chu, Rongwei & Hung, Iris, 2022. "Job Changing Frequency and Experimental Decisions: A Field Study of Migrant Workers in the Manufacturing Industry," MPRA Paper 115472, University Library of Munich, Germany.
    11. Xiaomeng Lu & Jingna Xiao & Yu Wu, 2021. "Financial literacy and household asset allocation: Evidence from micro‐data in China," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(4), pages 1464-1488, December.
    12. Kong, Xiaoran & Zhang, Xueying & Yan, Cheng & Ho, Kung-Cheng, 2022. "China's historical imperial examination system and corporate social responsibility," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    13. Can Xu & Andreas Steiner, 2022. "Does Public Employment Affect Household Saving Rates? Evidence from Chinese Household Data," CESifo Working Paper Series 9741, CESifo.
    14. Wu, Bangzheng & Yue, Pengpeng & Zuo, Shengqiang, 2023. "Borrow to be the poor or the rich? It depends: Credit market and wealth accumulation," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 804-821.
    15. Yongbo Ge & Xiaoran Kong & Geilegeilao Dadilabang & Kung‐Cheng Ho, 2023. "The effect of Confucian culture on household risky asset holdings: Using categorical principal component analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 839-857, January.
    16. Jacoby, Gady & Liao, Chi & Lu, Xiaomeng & Wan, Fang, 2023. "The effect of fraud experience on investment behavior," Emerging Markets Review, Elsevier, vol. 55(C).
    17. Isha Chawla & Joseph Svec, 2023. "Household savings and present bias among Chinese couples: A household bargaining approach," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 648-672, January.
    18. Xiaomeng Lu & Jiaojiao Guo & Hailing Zhou, 2021. "Digital financial inclusion development, investment diversification, and household extreme portfolio risk," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(5), pages 6225-6261, December.
    19. Wei Wang & Kimberly A. Eddleston & Francesco Chirico & Stephen X. Zhang & Qiaozhuan Liang & Wei Deng, 2023. "Family Diversity and Business Start-Up: Do Family Meals Feed the Fire of Entrepreneurship?," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1265-1297, July.

    More about this item

    Keywords

    Household savings rate; China; Social norms; Confucianism;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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