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

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  • Santaeulàlia-Llopis, Raül ; Zheng, Yu

Abstract

The welfare gains of economic growth hinge on the ability of households to insure consumption against the risks associated with growth. We exploit a novel and unique opportunity to study this question using China, an economy that has witnessed enormous and sustained growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that triples from 1989 to 2009. The loss of consumption insurance has implications for the welfare assessment of economic growth across time and across space.

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  • Santaeulàlia-Llopis, Raül ; Zheng, Yu, 2016. "The Price of Growth: Consumption Insurance in China 1989-2009," Economics Working Papers ECO2016/13, European University Institute.
  • Handle: RePEc:eui:euiwps:eco2016/13
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    Cited by:

    1. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    2. Cynthia Kinnan & Shing-Yi Wang & Yongxiang Wang, 2015. "Relaxing Migration Constraints for Rural Households," NBER Working Papers 21314, National Bureau of Economic Research, Inc.
    3. Krueger, Dirk & Wu, Chunzan, 2018. "How Much Consumption Insurance in Bewley Models with Endogenous Family Labor Supply?," CEPR Discussion Papers 12828, C.E.P.R. Discussion Papers.
    4. Hanewald, Katja & Jia, Ruo & Liu, Zining, 2021. "Why is inequality higher among the old? Evidence from China," China Economic Review, Elsevier, vol. 66(C).
    5. Cheng, Zhiming, 2021. "Education and consumption: Evidence from migrants in Chinese cities," Journal of Business Research, Elsevier, vol. 127(C), pages 206-215.
    6. Raül Santaeulàlia-Llopis & Yu Zheng, 2017. "Why Is Food Consumption Inequality Underestimated? A Story of Vices and Children," Working Papers 969, Barcelona Graduate School of Economics.
    7. Haiyan Ding & Hui He, 2018. "A Tale of Transition: An Empirical Analysis of Economic Inequality in Urban China, 1986-2009," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 106-137, July.
    8. De Magalhães, Leandro & Santaeulàlia-Llopis, Raül, 2018. "The consumption, income, and wealth of the poorest: An empirical analysis of economic inequality in rural and urban Sub-Saharan Africa for macroeconomists," Journal of Development Economics, Elsevier, vol. 134(C), pages 350-371.
    9. Raul Santaeulalia-Llopis & Diego Restuccia, 2014. "Land Misallocation and Productivity," 2014 Meeting Papers 1314, Society for Economic Dynamics.
    10. Leandro De Magalhães & Raül Santaeulàlia-Llopis, 2015. "The Consumption, Income, and Wealth of the Poorest: Cross-Sectional Facts of Rural and Urban Sub-Saharan Africa for Macroeconomists," Bristol Economics Discussion Papers 15/655, School of Economics, University of Bristol, UK.
    11. Santaeulàlia-Llopis, Raül ; Zheng, Yu, 2016. "Missing Consumption Inequality: Direct Evidence from Individual Food Data," Economics Working Papers ECO2016/12, European University Institute.
    12. Niu, Geng & Wang, Qi & Li, Han & Zhou, Yang, 2020. "Number of brothers, risk sharing, and stock market participation," Journal of Banking & Finance, Elsevier, vol. 113(C).

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    More about this item

    Keywords

    Income Risk; Consumption Insurance; Growth; Welfare; China;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • D1 - Microeconomics - - Household Behavior

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