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Public Pension and Household Saving: Evidence from urban China

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  • Jin Feng
  • Lixin He
  • Hiroshi Sato

Abstract

We relate household saving to pension reform, to explain the high household saving rates in urban China from a new perspective. We use the exogenous-policy induced-variation in pension wealth to explicitly estimate the impact of pension wealth on household saving, and obtain a significant offset effect of pension wealth on household saving. Our estimations show that pension reform boosted the household saving rate in 1999 by about 6 percentage points for cohort aged 25-29 and by about 3 percentage points for cohort aged 50-59. Our results also indicate that declining pension wealth reduces expenditure on education and health more than on other consumption items.

Suggested Citation

  • Jin Feng & Lixin He & Hiroshi Sato, 2009. "Public Pension and Household Saving: Evidence from urban China," Global COE Hi-Stat Discussion Paper Series gd08-030, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd08-030
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    More about this item

    Keywords

    pension reform; pension wealth; household saving rate; urban China;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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