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Demographic Patterns and Household Saving in China

  • Steven Lugauer

    (University of Notre Dame)

  • Nelson C. Mark

    (University of Notre Dame and NBER)

  • Chadwick R. Curtis

    (University of Notre Dame)

This paper studies the effect that changing demographic patterns have had on the house- hold saving rate in China. We undertake a quantitative investigation using an overlapping generations (OLG) model where agents live for 85 years. Consumers begin to exercise deci- sion making when they are 18. From age 18 to 60, they work and raise children. Dependent children’s utility enter into parent’s utility where parents choose the consumption level of the young until they leave the household. Working agents give a portion of their labor income to their retired parents and save for their own retirement while the aged live on their accumulated assets and support from their children. Remaining assets are bequeathed to the living upon death We parameterize the model and take future demographic changes, labor income and interest rates as exogenously given from the data. We then run the model from 1963 to 2009 and find that the model accounts for nearly all the observed increase in the household saving rate.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 529.

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Date of creation: 2011
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Handle: RePEc:red:sed011:529
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  1. Krueger, Dirk & Ludwig, Alexander, 2006. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," CFS Working Paper Series 2006/18, Center for Financial Studies (CFS).
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  5. Ferrero, Andrea, 2010. "A structural decomposition of the U.S. trade balance: Productivity, demographics and fiscal policy," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 478-490, May.
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  15. Kaiji Chen & Ayse Imrohoroglu & Selo Imrohoroglu, 2005. "Japanese Saving Rate," Macroeconomics 0502017, EconWPA.
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  17. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511 - 564.
  18. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
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