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China's Savings Multiplier

  • Mehlum, Halvor

    ()

    (Dept. of Economics, University of Oslo)

  • Torsvik, Ragnar

    ()

    (Norwegian University of Science and Technology)

  • Valente, Simone

    ()

    (Norwegian University of Science and Technology)

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 benefits provided through the state owned enterprises, have stimulated savings and capital accumulation.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2013/memo-17-2013.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 17/2013.

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Length: 52 pages
Date of creation: 04 Jul 2013
Date of revision:
Handle: RePEc:hhs:osloec:2013_017
Contact details of provider: Postal:
Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Olivier Blanchard & Francesco Giavazzi, 2006. "Rebalancing Growth in China: A Three-Handed Approach," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(4), pages 1-20.
  2. Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," NBER Working Papers 14546, National Bureau of Economic Research, Inc.
  3. repec:cii:cepiie:2010-april-122-4 is not listed on IDEAS
  4. Zhong, Hai, 2011. "The impact of population aging on income inequality in developing countries: Evidence from rural China," China Economic Review, Elsevier, vol. 22(1), pages 98-107, March.
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  8. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
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  12. Yang, Dennis T., 2012. "Aggregate Savings and External Imbalances in China," IZA Discussion Papers 6964, Institute for the Study of Labor (IZA).
  13. Pietro Peretto & Simone Valente, 2011. "Growth on a Finite Planet: Resources, Technology and Population in the Long Run," Working Papers 11-12, Duke University, Department of Economics.
  14. Franco Modigliani & Shi Larry Cao, 2004. "The Chinese Saving Puzzle and the Life-Cycle Hypothesis," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 145-170, March.
  15. Aart Kraay, 2000. "Household Saving in China," World Bank Economic Review, World Bank Group, vol. 14(3), pages 545-570, September.
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  17. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
  18. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  19. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
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  22. Heikki Oksanen, 2010. "The Chinese pension system - First results on assessing the reform options," European Economy - Economic Papers 2008 - 2015 412, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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