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The Price of Growth: Consumption Insurance in China 1989-2009

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  • Raül Santaeulàlia-Llopis
  • Yu Zheng

Abstract

We exploit a novel and unique opportunity to document the transmission of income risk to consumption in a growing economy. Our laboratory is China, an economy that has witnessed enormous and sustained growth. We build a long panel of household-level consumption and income data. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that at least triples from 1989 to 2009. Although preliminary, our welfare analysis suggests that the loss of consumption insurance can have first-order implications for the welfare assessment of economic growth.

Suggested Citation

  • Raül Santaeulàlia-Llopis & Yu Zheng, 2017. "The Price of Growth: Consumption Insurance in China 1989-2009," Working Papers 995, Barcelona School of Economics.
  • Handle: RePEc:bge:wpaper:995
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    More about this item

    Keywords

    economic growth; income risk; consumption insurance; welfare; China;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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