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Consumption Fluctuations and Welfare: Evidence from China

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  • Ho, Chun-Yu
  • Ho, Wai-Yip Alex
  • Li, Dan

Abstract

Summary This paper examines inter-provincial consumption risk sharing and intertemporal consumption smoothing across Chinese provinces before and after the 1979 economic reform. Our results indicate that the degree of consumption risk sharing among Chinese provinces is lower than that within the United States and across the national boundaries of OECD countries. On the other hand, the level of consumption smoothing among Chinese provinces is higher than that across OECD or European Union countries, but lower than that in the United States. Moreover, our results show that consumption risk sharing and smoothing in China have deteriorated since the 1979 economic reform. Finally, we show that eliminating consumption fluctuations yields substantial welfare gains, which suggests that stabilization policies are desirable for China.

Suggested Citation

  • Ho, Chun-Yu & Ho, Wai-Yip Alex & Li, Dan, 2010. "Consumption Fluctuations and Welfare: Evidence from China," World Development, Elsevier, vol. 38(9), pages 1315-1327, September.
  • Handle: RePEc:eee:wdevel:v:38:y:2010:i:9:p:1315-1327
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    Cited by:

    1. Ho, Chun-Yu & Ho, Wai-Yip Alex & Li, Dan, 2015. "Intranational risk sharing and its determinants," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 89-113.
    2. Peter Fuleky & L Ventura & Qianxue Zhao, 2013. "Common correlated effects and international risk sharing," Working Papers 201304, University of Hawaii at Manoa, Department of Economics.

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