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Demographic Patterns and Household Saving in China

  • Steven Lugauer

    ()

    (Department of Economics, University of Notre Dame)

  • Nelson Mark

    ()

    (Department of Economics, University of Notre Dame)

This paper studies how changing demographics can explain much of the evolution of China's household saving rate from 1955 to 2009. We undertake a quantitative investigation using an overlapping generations model in which agents live for 85 years. Agents begin to exercise decision making when they are 20. From age 20 to 63, they work. From age 20 to 49, they also provide for children. Dependent children's consumption enters into the parent's utility, and parents choose the consumption level of the young until they leave the household. Working agents transfer a portion of their labor income to their retired parents and save for their own retirement. Retirees live of of their accumulated assets and support from current workers. We present agents in the parameterized model with the future time-path of the demographics, interest rates and wages as given by the data and analyze their saving decisions. The simulated model accounts for nearly all the observed increase in the household saving rate from 1955 to 2009.

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File URL: http://www3.nd.edu/~tjohns20/RePEc/deendus/wpaper/006_saving.pdf
File Function: First version, 2010
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Paper provided by University of Notre Dame, Department of Economics in its series Working Papers with number 007.

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Length: 32 pages
Date of creation: Dec 2010
Date of revision: Jun 2012
Handle: RePEc:nod:wpaper:006
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