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

36 Pages Posted: 6 Dec 2006  

Charles Yuji Horioka

Asian Growth Research Institute; National Bureau of Economic Research (NBER); Osaka University - Institute of Social and Economic Research (ISER)

Junmin Wan

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

Multiple version iconThere are 2 versions of this paper

Date Written: December 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, (in many cases) the real interest rate, and (in some cases) the inflation rate. However, we find that the variables relating to the age structure of the population have the expected impact on the household saving rate in only one of the four samples. These results provide mixed support for the life cycle hypothesis as well as the permanent income 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.

Suggested Citation

Horioka, Charles Yuji and Wan, Junmin, The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data (December 2006). NBER Working Paper No. w12723. Available at SSRN: https://ssrn.com/abstract=948185

Charles Yuji Horioka (Contact Author)

Asian Growth Research Institute ( email )

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Kitakyushu, Fukuoka 803-0814
Japan

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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Junmin Wan

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

1-31 Machikaneyama
Toyonaka, Osaka 560-0043
Japan

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