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Co-residence, Life-Cycle Savings and Inter-generational Support in Urban China

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  • Mark Rosenzweig
  • Junsen Zhang

Abstract

We use unique data characterizing individual savings for twins and non-twins in urban China to examine why the savings rates of the young are elevated relative to the middle-aged, despite rising individual life-cycle incomes. We show that inter-generational co-residence masks the true life-cycle patterns of individual savings in standard Chinese household data sets, which are aggregated at the household level. Moreover, we show that to understand life-cycle savings behavior it is necessary to take into account inter-generational co-residence, an important phenomenon in China and in many developing countries. To test a model that describes joint life-cycle savings and co-residence decisions by two generations, we use a variety of standard twins methods. The estimates provide support for the model, including that individuals born into larger families provide less financial support to parents and are more likely to co-reside with parents when young, but do not have different savings rates. We also found that inter-generational co-residence is lower the higher the incomes of the young but higher when the parents have higher incomes and that inter-generational co-residence, net of income, is associated with higher savings for the young but not higher savings for the old. Our results highlight the importance of high housing costs and the prevalence of inter-generational shared housing as key reasons for the higher savings rates for the urban young in China, but also indicate that in urban China neither old-age support by the young nor the one-child policy are major factors.

Suggested Citation

  • Mark Rosenzweig & Junsen Zhang, 2014. "Co-residence, Life-Cycle Savings and Inter-generational Support in Urban China," NBER Working Papers 20057, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20057
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    Cited by:

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    2. Oliveira, Jaqueline, 2016. "The value of children: Inter-generational support, fertility, and human capital," Journal of Development Economics, Elsevier, vol. 120(C), pages 1-16.
    3. Dautovic, Ernest & Hau, Harald & Huang, Yi, 2017. "The Consumption Response to Minimum Wages: Evidence from Chinese Households," CEPR Discussion Papers 12057, C.E.P.R. Discussion Papers.
    4. Lingguo Cheng & Hong Liu & Ye Zhang & Zhong Zhao, 2018. "The heterogeneous impact of pension income on elderly living arrangements: evidence from China’s new rural pension scheme," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(1), pages 155-192, January.
    5. Horváth Gergely, 2020. "The Impact of Marital Status on Job Finding: A Field Experiment in the Chinese Labor Market," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(4), pages 1-10, October.
    6. Steven Lugauer & Jinlan Ni & Zhichao Yin, 2014. "Micro-Data Evidence on Family Size and Chinese Saving Rates," Working Papers 023, University of Notre Dame, Department of Economics, revised Jun 2014.
    7. Curtis, Chadwick C. & Lugauer, Steven & Mark, Nelson C., 2017. "Demographics and aggregate household saving in Japan, China, and India," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 175-191.
    8. Jun Nie & Andrew Palmer, 2016. "Consumer Spending in China: The Past and the Future," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 25-49.
    9. FAN, Yi, 2016. "Intergenerational income persistence and transmission mechanism: Evidence from urban China," China Economic Review, Elsevier, vol. 41(C), pages 299-314.
    10. Fabrizio Zilibotti, 2017. "Growing and Slowing Down Like China," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 943-988.
    11. Hanewald, Katja & Bateman, Hazel & Fang, Hanming & Wu, Shang, 2020. "Is there a demand for reverse mortgages in China? Evidence from two online surveys," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 19-37.
    12. Rao, Ziwei, 2021. "Do children prevent their poor old parents from working?," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242424, Verein für Socialpolitik / German Economic Association.
    13. Christine Ho, 2019. "Child’s gender, parental monetary investments and care of elderly parents in China," Review of Economics of the Household, Springer, vol. 17(3), pages 741-774, September.
    14. Yi Chen & Hanming Fang, 2018. "The Long-Term Consequences of Having Fewer Children in Old Age: Evidence from China’s “Later, Longer, Fewer” Campaign," NBER Working Papers 25041, National Bureau of Economic Research, Inc.
    15. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    16. Ding, Weili & Zhang, Yuan, 2014. "When a son is born: The impact of fertility patterns on family finance in rural China," China Economic Review, Elsevier, vol. 30(C), pages 192-208.
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    18. Bollinger, Christopher & Ding, Xiaozhou & Lugauer, Steven, 2022. "The expansion of higher education and household saving in China," China Economic Review, Elsevier, vol. 71(C).
    19. Guo, Hao & Hu, Chenxu & Ding, Xiaozhou, 2022. "Son preference, intrahousehold discrimination, and the gender gap in education in China," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 324-339.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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