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Why are Saving Rates of Urban Households in China Rising?

51 Pages Posted: 1 Jul 2008  

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; IZA Institute of Labor Economics

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Date Written: June 2008

Abstract

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to ¼ of disposable income. We use household-level data to explain the postponing of consumption despite rapid income growth. Tracing cohorts over time indicates virtually no consumption smoothing over the life cycle. Saving rates have increased across all demographic groups, although the age-profile of savings has an unusual U-shaped pattern, with saving rates being the highest among the youngest and oldest households in recent years. These patterns are best explained by the rising private burden of expenditures on housing, education, and health care.

Keywords: Working Paper, China, People's Republic of, Private savings, Income, Economic growth, Private consumption

Suggested Citation

Chamon, Marcos and Prasad, Eswar S., Why are Saving Rates of Urban Households in China Rising? (June 2008). IMF Working Papers, Vol. , pp. 1-49, 2008. Available at SSRN: https://ssrn.com/abstract=1154322

Marcos Chamon (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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Eswar Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

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United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

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Brookings Institution ( email )

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NBER ( email )

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IZA Institute of Labor Economics

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