Abstract

http://ssrn.com/abstract=1049181
 
 

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Why are Saving Rates of Urban Households in China Rising?


Marcos Chamon


International Monetary Fund (IMF) - Research Department

Eswar S. Prasad


Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; Institute for the Study of Labor (IZA)

December 2008

IZA Discussion Paper No. 3191
Brookings Global Economy and Development Paper No. 31

Abstract:     
From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. Saving rates have increased across all demographic groups although the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, as reflected in constraints on borrowing against future income and low returns on financial assets.

Number of Pages in PDF File: 51

Keywords: China, China's economy, financial markets, savings rates, global economics, economic development

JEL Classification: D12, E21, O16

working papers series





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Date posted: December 3, 2007  

Suggested Citation

Chamon, Marcos and Prasad, Eswar S., Why are Saving Rates of Urban Households in China Rising? (December 2008). IZA Discussion Paper No. 3191; Brookings Global Economy and Development Paper No. 31. Available at SSRN: http://ssrn.com/abstract=1049181

Contact Information

Marcos Chamon
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-5867 (Phone)
Eswar S. Prasad (Contact Author)
Cornell University - Dyson School of Applied Economics and Management ( email )
440 Warren Hall
Ithaca, NY 14853
United States
HOME PAGE: http://prasad.aem.cornell.edu
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
Brookings Institution ( email )
1775 Massachusetts Ave, NW
Washington, DC 20036
United States
NBER ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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