IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v52y2017icp222-235.html
   My bibliography  Save this article

Can income inequality explain China’s saving puzzle?

Author

Listed:
  • Chu, Tianshu
  • Wen, Qiang

Abstract

Since the beginning of 21st century, China has experienced increasing aggregate saving rates as well as increasing income inequality simultaneously. In this paper, we explore the possible linkage between rising saving rates and rising income inequality. We first characterize China’s saving behavior using household survey data, finding that households with high income save at higher rates. We then derive analytically that the saving rate relates with income inequality index in a nonlinear way, in particular, the aggregate saving rate is a linear function of interaction term of the average income level and squared income inequality indicator, and the level value of average income. We conduct median regression analysis using community level data, finding that aggregate saving rates are increasing in income inequality, in particular, the higher the income inequality, the greater the marginal effect of income inequality on aggregate saving rates. This research has policy implication that the effective way to promote China’s domestic demand is through promoting a more equal distribution of income.

Suggested Citation

  • Chu, Tianshu & Wen, Qiang, 2017. "Can income inequality explain China’s saving puzzle?," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 222-235.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:222-235
    DOI: 10.1016/j.iref.2017.01.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056017300291
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2017.01.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fuzhong Chen & Guohai Jiang & Mengyi Gu, 2021. "Household savings and subjective wellbeing: Evidence from China," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(4), pages 1489-1504, December.
    2. Song, Zhongchen & Coupé, Tom & Reed, W. Robert, 2021. "Estimating the effect of the one-child policy on Chinese household savings - Evidence from an Oaxaca decomposition," China Economic Review, Elsevier, vol. 66(C).
    3. Tan, Jing & Xu, Hao & Yu, Jingwen, 2022. "The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China," Economic Modelling, Elsevier, vol. 106(C).

    More about this item

    Keywords

    Income inequality; Aggregate saving rates; Median regression;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:222-235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.