The One-Child Policy and Household Savings

Nicolas Coeurdacier, Keyu Jin and Taha Choukhmane

No 9688, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We ask how much the advent of the `one child policy' can explain the sharp rise in China's household saving rate. In a life-cycle model with endogenous fertility, intergenerational transfers and human capital accumulation, we show a macroeconomic and a microeconomic channel through which restrictions in fertility raise aggregate saving. The macro-channel operates through a shift in the composition of demographics and income across generations. The micro-channel alters saving behaviour and education decisions at the individual level. A main objective is to quantify these various channels in the data. Exploiting the birth of twins as an identification strategy, we provide direct empirical evidence on the micro-channel and show its quantitative relevance in accounting for the rise in the household saving rate since the inception of the policy in 1980. Our quantitative OLG model can explain from a third to at most 60% of the rise in aggregate saving rate; equally important is its implied shift in the level and shape of the age-saving profile consistent with micro-level estimates from the data.

Keywords: Fertility; Intergenerational transfers; Life cycle consumption/savings (search for similar items in EconPapers)
JEL-codes: D10 D91 E21 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Journal Article: The One-Child Policy and Household Saving (2023)
Working Paper: The one-child policy and household saving (2023)
Working Paper: The One-Child Policy and Household Saving (2023)
Working Paper: The One-Child Policy and Household Saving (2023)
Working Paper: The One-Child Policy and Household Savings (2014)
Working Paper: The One-Child Policy and Household Savings (2014)
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