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China’s Savings Multiplier


  • Halvor Mehlum


  • Ragnar Torvik


  • Simone Valente



China’s growth is characterized by massive capital accumulation, made possible by high and increasing domestic savings. In this paper we develop a model with the aim of explaining why savings rates have been high and increasing,and we investigate the general equilibrium effects on capital accumulation and growth. We show that increased savings and capital accumulation stimulates further savings and capital accumulation, through an intergenerational distribution effect and an old-age requirement effect. We introduce what we term the savings multiplier, and we discuss why and how the one-child policy, and the dismantling of the cradle-to-grave social bene?ts provided through the state owned enterprises, have stimulated savings and capital accumulation.

Suggested Citation

  • Halvor Mehlum & Ragnar Torvik & Simone Valente, 2013. "China’s Savings Multiplier," Working Papers No 4/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  • Handle: RePEc:bny:wpaper:0013

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    References listed on IDEAS

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    Cited by:

    1. repec:eee:inecon:v:108:y:2017:i:c:p:169-190 is not listed on IDEAS
    2. Cozzi, Guido & Davenport, Margaret, 2017. "Extrapolative expectations and capital flows during convergence," Journal of International Economics, Elsevier, vol. 108(C), pages 169-190.
    3. Mehlum, Halvor & Torvik, Ragnar & Valente, Simone, 2016. "The savings multiplier," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 90-105.

    More about this item


    China; One-child policy; Overlapping generations; Growth; Savings;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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