Economics at your fingertips  

Knowing when to splurge: Precautionary saving and Chinese-Canadians

Mark S. Manger and J. Scott Matthews

Journal of Asian Economics, 2021, vol. 76, issue C

Abstract: Why do household saving rates differ so much across countries? This micro-level question has global implications: countries that systematically “over-save” export capital by running current account surpluses. In recipient countries, interest rates are therefore too low and financial stability is put at risk. Existing theories argue that saving is precautionary; however tests of these theories are limited to cross-country comparisons and the results are mixed. We report the findings of an original survey experiment. Using a simulated financial saving task implemented online, we compare the saving preferences of a large and diverse sample of Chinese-Canadians with other Canadians. This comparison is instructive given that Chinese-Canadians migrated from, or descend from those who migrated from, a high-saving environment to a low-saving, high-debt environment. We also compare behavior in the presence and absence of a simulated “welfare state”, which we represent in the form of mandatory insurance. Our respondents exhibit behavior in the saving task that corresponds to standard economic assumptions about lifecycle savings and risk-aversion. We find strong evidence that precautionary saving is reduced when a mandatory insurance is present, but no sign that Chinese cultural influences, represented in either linguistic or ethnic terms, have any effect on saving behavior. Overall, the results suggest that Chinese “over-saving” is likely to be addressed when more generous welfare state policies are put in place.

Keywords: Saving behavior; Simulation game; Language effects; Insurance (search for similar items in EconPapers)
JEL-codes: D14 D15 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.asieco.2021.101367

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-01-04
Handle: RePEc:eee:asieco:v:76:y:2021:i:c:s1049007821000968