Do Chinese Really Save Too Much? Aspects from Total Factor Productivity Growth in China Since 1952

25 Pages Posted: 8 Dec 2011

See all articles by Chong-En Bai

Chong-En Bai

Tsinghua University - School of Economics & Management

Qiong Zhang

Central University of Finance and Economics (CUFE) - School of Economics

Date Written: December 6, 2011

Abstract

China’s economic growth over the past three decades is unprecedented. Although this growth is commonly attributed to a high domestic savings rate among “thrifty” Chinese, savings alone cannot promote economic growth unless productivity has continuously grown for such a long period. This article uses a one-sector, neoclassical growth model to calibrate the economy to Chinese data since 1952 and finds that measuring changes in total factor productivity between 1952 and 2005 can well capture the secular movements in the Chinese savings rate. Far from supporting the widespread belief that China’s savings rate is too high, this article argues that even thrifty Chinese “under-saved” for most of the years during this period; furthermore, the fiscal reforms of 1983 and 1985 further suppressed saving behavior, especially when initially implemented. In presenting such findings, this article at least partly solves the so-called “Chinese savings puzzle.”

Keywords: Growth model, savings rate, total factor productivity, capital tax rate

JEL Classification: E21, E62, O40

Suggested Citation

Bai, Chong-En and Zhang, Qiong, Do Chinese Really Save Too Much? Aspects from Total Factor Productivity Growth in China Since 1952 (December 6, 2011). Stanford Asia Health Policy Program Working Paper No. 25. Available at SSRN: https://ssrn.com/abstract=1969132 or http://dx.doi.org/10.2139/ssrn.1969132

Chong-En Bai (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Qiong Zhang

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing
China

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