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Demographic Trends and Household Saving in China

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  • M. Wakabayashi
  • F.L. MacKellar
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    Abstract

    A key source of economic growth in China has been the abundance of household savings, especially in rural regions. In this paper, we estimate saving functions for urban and rural areas in China, paying particular attention to the role of demographic structure. Our results confirm other researchers' finding that saving rates vary inversely with both the elderly and youth dependency ratios, but that the former effect is more significant. This suggests that prospective demographic trends in China will put downward pressure on household savings. Combining our estimation results with reasonable assumptions about economic growth and U.N. population projections, we predict that household savings in China will begin to decline about 2025. A significant shortage of "ex ante" savings could develop as a result. These results confirm the results and reinforce the concerns expressed by Heller and Szymansky (1997) about the long-run prospect for savings in the East Asian region and possible implications for the global economy.

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    File URL: http://www.iiasa.ac.at/Publications/Documents/IR-99-057.pdf
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    Bibliographic Info

    Paper provided by International Institute for Applied Systems Analysis in its series Working Papers with number ir99057.

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    Date of creation: Nov 1999
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    Handle: RePEc:wop:iasawp:ir99057

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    1. Ronald D Lee & Andrew Mason & Tim Miller, 1998. "Saving, Wealth, and Population," Working Papers 199805, University of Hawaii at Manoa, Department of Economics.
    2. Schmidt-Hebbel, Klaus & Webb, Steven B. & Corsetti, Giancarlo, 1991. "Household saving in developing countries : first cross-country evidence," Policy Research Working Paper Series 575, The World Bank.
    3. Weil, David N, 1994. "The Saving of the Elderly in Micro and Macro Data," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 55-81, February.
    4. Steven A. Symansky & Peter S. Heller, 1997. "Implications for Savings of Aging in the Asian "Tigers"," IMF Working Papers 97/136, International Monetary Fund.
    5. Angus Deaton & Christina Paxson, 1997. "The effects of economic and population growth on national saving and inequality," Demography, Springer, vol. 34(1), pages 97-114, February.
    6. Horioka, C.Y., 1989. "The Determinants Of Japan'S Saving Rate: The Impact Of The Age Structure Of The Population And Other Factors," ISER Discussion Paper 0189, Institute of Social and Economic Research, Osaka University.
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    Cited by:
    1. Ismail, Aisha & Rashid, Kashif, 2013. "Determinants of household saving: Cointegrated evidence from Pakistan (1975–2011)," Economic Modelling, Elsevier, vol. 32(C), pages 524-531.

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