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Why are Saving Rates of Urban Households in China Rising?

  • Marcos Chamon
  • Eswar Prasad

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to ¼ of disposable income. We use household-level data to explain the postponing of consumption despite rapid income growth. Tracing cohorts over time indicates virtually no consumption smoothing over the life cycle. Saving rates have increased across all demographic groups, although the age-profile of savings has an unusual U-shaped pattern, with saving rates being the highest among the youngest and oldest households in recent years. These patterns are best explained by the rising private burden of expenditures on housing, education, and health care.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/145.

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Length: 49
Date of creation: 01 Jun 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/145
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  8. Christopher D Carroll, 1990. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," Economics Working Paper Archive 371, The Johns Hopkins University,Department of Economics, revised Aug 1996.
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  10. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
  11. Eswar Prasad & Michael P. Keane, 2002. "Changes in the Structure of Earnings During the Polish Transition," IMF Working Papers 02/135, International Monetary Fund.
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  13. Nicola Fuchs-Schundeln & Matthias Schundeln, 2005. "Precautionary Savings and Self-Selection - Evidence from the German Reunification "Experiment"," Harvard Institute of Economic Research Working Papers 2069, Harvard - Institute of Economic Research.
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  15. Christopher D. Carroll & Byung-Kun Rhee & Changyong Rhee, 1994. "Are There Cultural Effects on Saving? Some Cross-Sectional Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 685-699.
  16. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
  17. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  18. Charles Yuji Horioka & Junmin Wan, 2007. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 2077-2096, December.
  19. McKenzie, David J., 2006. "Precautionary saving and consumption growth in Taiwan," China Economic Review, Elsevier, vol. 17(1), pages 84-101.
  20. Angus Deaton & Christina Paxson, 2000. "Growth and Saving Among Individuals and Households," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 212-225, May.
  21. Nicola Fuchs-Schündeln, 2008. "The Response of Household Saving to the Large Shock of German Reunification," Working Papers, Center for Retirement Research at Boston College wp2008-21, Center for Retirement Research, revised Dec 2008.
  22. Nicola Fuchs-Schündeln & Matthias Schündeln, 2005. "Precautionary Savings and Self-Selection: Evidence from the German Reunification "Experiment" Abstract: We combine particular features of the German civil service with the unique event of Ge," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 1085-1120.
  23. Deaton, A.S. & Paxson, C.H., 1992. "Saving, Growth, and Aging in Taiwan," Papers 161, Princeton, Woodrow Wilson School - Development Studies.
  24. Christopher D. Carroll, 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 1-55.
  25. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
  26. Wooheon Rhee, 2004. "Habit Formation And Precautionary Saving: Evidence From The Korean Household Panel Studies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(2), pages 1-19, December.
  27. 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.
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