IDEAS home Printed from https://ideas.repec.org/p/fip/fedfwp/2007-28.html
   My bibliography  Save this paper

The determinants of household saving in China: a dynamic panel analysis of provincial data

Author

Listed:
  • Charles Yuji Horioka
  • Junmin Wan

Abstract

In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, and (in some cases) the real interest rate and the inflation rate. However, we find that the variables relating to the age structure of the population usually do not have a significant impact on the household saving rate. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.

Suggested Citation

  • Charles Yuji Horioka & Junmin Wan, 2007. "The determinants of household saving in China: a dynamic panel analysis of provincial data," Working Paper Series 2007-28, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:2007-28
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/publications/economics/papers/2007/wp07-28bk.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    2. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    3. Aart Kraay, 2000. "Household Saving in China," The World Bank Economic Review, World Bank, vol. 14(3), pages 545-570, September.
    4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    5. Kuijs, Louis, 2005. "Investment and saving in China," Policy Research Working Paper Series 3633, The World Bank.
    6. Mechthild Schrooten & Sabine Stephan, 2005. "Private savings and transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 287-309, April.
    7. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    8. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    9. Alessie, Rob & Lusardi, Annamaria, 1997. "Consumption, saving and habit formation," Economics Letters, Elsevier, vol. 55(1), pages 103-108, August.
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    11. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andreas Freytag & Sebastian Voll, 2013. "Institutions and savings in developing and emerging economies," Public Choice, Springer, vol. 157(3), pages 475-509, December.
    2. Kevin Luo & Tomoko Kinugasa, 2020. "Challenges for China’s economic development: the saving glut and policy implication," International Journal of Economic Policy Studies, Springer, vol. 14(1), pages 47-75, February.
    3. Walther, Herbert & Stiassny, Alfred, 2013. "International Comparisons of Household Saving Rates and Hidden Income," Department of Economics Working Paper Series 148, WU Vienna University of Economics and Business.
    4. James Alm & Asmaa El-Ganainy, 2013. "Value-added taxation and consumption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 105-128, February.
    5. Isis Gaddis & Stephan Klasen, 2014. "Economic development, structural change, and women’s labor force participation:," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 639-681, July.
    6. Abonazel, Mohamed R., 2016. "Bias Correction Methods for Dynamic Panel Data Models with Fixed Effects," MPRA Paper 70628, University Library of Munich, Germany.
    7. Caggese, Andrea, 2007. "Testing financing constraints on firm investment using variable capital," Journal of Financial Economics, Elsevier, vol. 86(3), pages 683-723, December.
    8. Matjaž Volk & Polona Trefalt, 2014. "Access to Credit as a Growth Constraint," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(1), pages 29-39, May.
    9. Schneider, Sophie Therese, 2018. "North-South trade agreements and the quality of institutions: Panel data evidence," Hohenheim Discussion Papers in Business, Economics and Social Sciences 27-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    10. Möller Joachim & Tubadji Annie, 2009. "The Creative Class, Bohemians and Local Labor Market Performance: A Micro-data Panel Study for Germany 1975–2004," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 270-291, April.
    11. Coviello, Decio & Islam, Roumeen, 2006. "Does aid help improve economic institutions ?," Policy Research Working Paper Series 3990, The World Bank.
    12. Marcus Tamm & Harald Tauchmann & Stefan Greß & Jürgen Wasem, 2005. "Price Elasticities and Social Health Insurance Choice in Germany: A Dynamic Panel Data Approach," RWI Discussion Papers 0028, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    13. Mohamed Mnasri & Georges Dionne & Jean-Pierre Gueyie, 2013. "The Maturity Structure of Corporate Hedging: the Case of the U.S. Oil and Gas Industry," Cahiers de recherche 1337, CIRPEE.
    14. Rafiou Raphaël Bétila, 2021. "The impact of Ease of Doing Business on economic growth: a dynamic panel analysis for African countries," SN Business & Economics, Springer, vol. 1(10), pages 1-34, October.
    15. Al-Gasaymeh, Anwar, 2016. "Bank efficiency determinant: Evidence from the gulf cooperation council countries," Research in International Business and Finance, Elsevier, vol. 38(C), pages 214-223.
    16. Medina-Durango, Carlos Alberto & Posso Suárez, Christian Manuel & Tamayo, Jorge A. & Monsalve, Emma, 2012. "Dinámica de la demanda laboral en la industria manufacturera colombiana 1993-2009 : una estimación panel VAR," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 7, pages 289-330, Banco de la Republica de Colombia.
    17. Linh T.D. Huynh & Hien Thanh Hoang, 2019. "Effects of exchange rate volatility on bilateral import performance of Vietnam: A dynamic Generalised method of Moments panel approach," International Economic Journal, Taylor & Francis Journals, vol. 33(1), pages 88-110, January.
    18. Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi, 2015. "Monetary Policy, Firm Size and Equity Returns in An Emerging Market: Panel Evidence of Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 29-55.
    19. Garrone, Paola & Grilli, Luca, 2010. "Is there a relationship between public expenditures in energy R&D and carbon emissions per GDP? An empirical investigation," Energy Policy, Elsevier, vol. 38(10), pages 5600-5613, October.
    20. Christian Merkl & Stephanie Stolz, 2009. "Banks' regulatory buffers, liquidity networks and monetary policy transmission," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2013-2024.

    More about this item

    Keywords

    Saving and investment - China;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:fip:fedfwp:2007-28. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Federal Reserve Bank of San Francisco Research Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    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.