The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data

29 Pages Posted: 1 Dec 2006

See all articles by Charles Yuji Horioka

Charles Yuji Horioka

Kobe University; National Bureau of Economic Research; Asian Growth Research Institute; Osaka University

Junmin Wan

Osaka University - Osaka School of International Public Policy (OSIPP)

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Date Written: November 18, 2006

Abstract

In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, and (in some cases) the real interest rate and the inflation rate. However, we find that the variables relating to the age structure of the population usually do not have a significant impact on the household saving rate. These results provide mixed support for the life cycle hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.

Keywords: Age Structure, China, Chinese Economy, Demographics, Dependency Ratio, Habit Formation, Household Saving, Household Saving Rate, Household, Inertia, Life Cycle Hypothesis, Life Cycle Model, Persistence, Saving, and Saving Rate

JEL Classification: D12, D91, E21, J10

Suggested Citation

Horioka, Charles Yuji and Wan, Junmin, The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data (November 18, 2006). ISER Discussion Paper No. 676, Available at SSRN: https://ssrn.com/abstract=947636 or http://dx.doi.org/10.2139/ssrn.947636

Charles Yuji Horioka (Contact Author)

Kobe University ( email )

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National Bureau of Economic Research ( email )

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Asian Growth Research Institute ( email )

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Osaka University ( email )

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HOME PAGE: http://www.rieb.kobe-u.ac.jp

Junmin Wan

Osaka University - Osaka School of International Public Policy (OSIPP) ( email )

1-31 Machikaneyama
Toyonaka, Osaka 560-0043
Japan

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