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China's Savings Multiplier

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Author Info

  • Mehlum, Halvor

    ()
    (Dept. of Economics, University of Oslo)

  • Torsvik, Ragnar

    ()
    (Norwegian University of Science and Technology)

  • Valente, Simone

    ()
    (Norwegian University of Science and Technology)

Abstract

China's growth is characterized by massive capital accumulation, made possible by high and increasing domestic savings. In this paper we develop a model with the aim of explaining why savings rates have been high and increasing, and we investigate the general equilibrium effects on capital accumulation and growth. We show that increased savings and capital accumulation stimulates further savings and capital accumulation, through an intergenerational distribution effect and an old-age requirement effect. We introduce what we term the savings multiplier, and we discuss why and how the one-child policy, and the dismantling of the cradle-to-grave social benefits provided through the state owned enterprises, have stimulated savings and capital accumulation.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 17/2013.

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Length: 52 pages
Date of creation: 04 Jul 2013
Date of revision:
Handle: RePEc:hhs:osloec:2013_017

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: China; One-child policy; Overlapping generations; Growth; Savings;

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References

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  1. Galor, Oded & Ryder, Harl E., 1989. "Existence, uniqueness, and stability of equilibrium in an overlapping-generations model with productive capital," Journal of Economic Theory, Elsevier, vol. 49(2), pages 360-375, December.
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  16. Xin Meng, 2012. "Labor Market Outcomes and Reforms in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 75-102, Fall.
  17. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
  18. Steven Barnett & Ray Brooks, 2010. "China: Does Government Health and Education Spending Boost Consumption?," IMF Working Papers 10/16, International Monetary Fund.
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