A Sexually Unbalanced Model of Current Account Imbalances

63 Pages Posted: 4 Jun 2010 Last revised: 22 Mar 2023

See all articles by Qingyuan Du

Qingyuan Du

Columbia University

Shang-Jin Wei

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: May 2010

Abstract

Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists, transformation in many of these societies, namely, a steady increase in the surplus of men relative to women. We construct an OLG model with two sexes and a desire to marry. We show conditions under which an intensified competition in the marriage market can induce men to raise their savings rate, and produce a rise in the aggregate savings and current account surplus. This effect is economically significant if the biological desire to have a partner of the opposite sex is strong. A calibration of the model suggests that this factor could generate economically significant current account responses, or more than 1/2 of the actual current account imbalances observed in the data.

Suggested Citation

Du, Qingyuan and Wei, Shang-Jin, A Sexually Unbalanced Model of Current Account Imbalances (May 2010). NBER Working Paper No. w16000, Available at SSRN: https://ssrn.com/abstract=1612595

Qingyuan Du (Contact Author)

Columbia University ( email )

Shang-Jin Wei

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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