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Why Are Saving Rates of Urban Households in China Rising?

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  • Marcos Chamon
  • Eswar Prasad

Abstract

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to ¼ of disposable income. We use household-level data to explain the postponing of consumption despite rapid income growth. Tracing cohorts over time indicates virtually no consumption smoothing over the life cycle. Saving rates have increased across all demographic groups, although the age-profile of savings has an unusual U-shaped pattern, with saving rates being the highest among the youngest and oldest households in recent years. These patterns are best explained by the rising private burden of expenditures on housing, education, and health care.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/145.

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Length: 49
Date of creation: 01 Jun 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/145

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Keywords: Private savings; Income; Economic growth; Private consumption; expenditures; income growth; consumption growth; health expenditures; disposable income; expenditure; consumption expenditures; health expenditure; education expenditures; household income; social expenditures; consumption smoothing; lifetime income; consumption expenditure; permanent income; household characteristics; labor income; household consumption; real returns; real interest rate; total consumption; expenditures on health; nondurables consumption; consumption behavior; total expenditures; permanent income hypothesis; nondurable consumption; consumption patterns; consumption over time; consumption decisions; consumer durables; consumption equation; lifetime consumption; future consumption; national savings; intertemporal consumption; dissavings; consumption plans; national saving; national income; consumption measures; substitution effect; consumption value; current consumption; consumption paths; rate of return on savings;

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  1. Guest Post: The puzzle of Chinaâ??s rising household saving rate
    by Yves Smith in Naked capitalism on 2011-01-18 07:55:54
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