Why are Saving Rates of Urban Households in China Rising? / Marcos Chamon, Eswar Prasad.

Format:

Book

Author/Creator:

Chamon, Marcos.

Contributor:

National Bureau of Economic Research.

Prasad, Eswar.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14546.

NBER working paper series no. w14546

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. Saving rates have increased across all demographic groups although the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, as reflected in constraints on borrowing against future income and low returns on financial assets.

Notes:

Print version record

December 2008.