The One-Child Policy and Chinese Saving Behavior

Zhongchen Song, Tom Coupé and W. Reed ()

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: Researchers have long puzzled over China’s high saving rate. Some have hypothesized that the explanation lies with China’s One-Child Policy (OCP). According to this hypothesis, faced with fewer children to support them in their old age, Chinese parents increased their saving to finance retirement. Previous research relied on empirical studies of the relationship between children and saving behavior. However, all of these studies based their analysis on data after the OCP was implemented. Their implicit counterfactual for China without an OCP was households with multiple children living in an OCP environment. In contrast, we compare Chinese people with people from regions that do not have restrictive population policies (Taiwan, Hong Kong, Singapore, Malaysia, Japan, and South Korea). These regions share many cultural and demographic characteristics with China that suggest they can be used as a counterfactual for China. This approach also enables us to employ a Blinder-Oaxaca decomposition procedure to identify the different channels by which children could affect savings. Our main finding is that there is little difference in the saving behavior of Chinese people with their regional counterfactuals. This is evidence against the hypothesis that the OCP was a major contributor to China’s high saving rate. It also suggests that the recent relaxation of the OCP cannot be counted upon to boost Chinese consumption.

Keywords: China; One-Child Policy; Saving rate; Demographics; Blinder-Oaxaca decomposition (search for similar items in EconPapers)
JEL-codes: D14 E21 J13 J18 O10 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-10-01
New Economics Papers: this item is included in nep-cna, nep-dem, nep-mac, nep-sea and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:19/10

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