Fertility and Savings: The Effect of China's Two-Child Policy on Household Savings

58 Pages Posted: 7 Dec 2021

See all articles by Scott R. Baker

Scott R. Baker

Northwestern University

Efraim Benmelech

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Zhishu Yang

Tsinghua University - School of Economics & Management

Qi Zhang

Shanghai Jiao Tong University (SJTU)

Date Written: November 18, 2021

Abstract

China’s high household savings rate has attracted great academic interest but remains a puzzle.
Potential explanations include demographic, policy, and financial causes. Yet a lack of reliable
microlevel data on household finances makes it difficult to assess the relative importance of each
factor. This paper uses individual income and spending transactions linked to demographic
characteristics and financial information on loan applications and credit availability from a large
Chinese bank in Inner Mongolia. We match a large subset of bank customers to administrative
records covering marriage and births and obtain a unique view into consumption and saving
patterns around important life events. Our results point toward identifying income growth,financial instability, and credit access, rather than such directives as the one-child policy, as the
primary causes of high levels of savings among Chinese households.

Keywords: Household Savings, Two-Child Policy, China

Suggested Citation

R. Baker, Scott and Benmelech, Efraim and Yang, Zhishu and Zhang, Qi, Fertility and Savings: The Effect of China's Two-Child Policy on Household Savings (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=3959835 or http://dx.doi.org/10.2139/ssrn.3959835

Scott R. Baker

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Efraim Benmelech

Northwestern University - Kellogg School of Management ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zhishu Yang (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China
+86-10-62771769 (Phone)
+86-10-62785562 (Fax)

Qi Zhang

Shanghai Jiao Tong University (SJTU) ( email )

China

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