Chinese household saving and dependent children: Theory and evidence

Steven Lugauer, Jinlan Ni () and Zhichao Yin

China Economic Review, 2019, vol. 57, issue C

Abstract: This paper examines the impact of family size on household saving. We first study a theoretical life-cycle model that includes finite lifetimes and saving for retirement and in which parents care about the consumption by their dependent children. The model implies a negative relationship between the number of dependent children in the family and the household saving rate. Then, we test the model's implications using new survey data on household finances in China. We use the differential enforcement of the one-child policy across counties to address the possible endogeneity between household saving and fertility decisions in a two-stage least squares Tobit regression. We find that Chinese families with fewer dependent children have significantly higher saving rates. The data yields several additional insights on household saving patterns. Households with college-age children have lower saving rates, and households residing in urban areas have higher saving rates and a lower ratio of education expenditures to income. However, having an additional child reduces saving rates more for households in urban areas than in rural areas. Our regressions also indicate that saving rates vary with age and tend to be higher for households with more workers, higher education, better health, and more assets.

Keywords: China; Household saving; Demographics; Overlapping generations (search for similar items in EconPapers)
JEL-codes: D12 D91 E21 F63 J11 O12 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:57:y:2019:i:c:s1043951x17301104

DOI: 10.1016/j.chieco.2017.08.005

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