The saving–growth–inequality triangle in China

Xinhua Gu and Pui Sun Tam

Economic Modelling, 2013, vol. 33, issue C, 850-857

Abstract: China's fast growth is perceived as a major determinant of its savings glut that contributes to global imbalances, but China's income inequality has been largely overlooked as the economy moves rapidly toward the Kuznets curve peak. This paper provides a new explanation for the complex issue of Chinese saving using a structural vector autoregressive (SVAR) model. We find that China's growth is positively affected by saving but has a limited effect on saving, that inequality mainly has a negative impact on growth but has a positive impact on saving, and that inequality is a stronger factor than growth in explaining high saving. Therefore, inequality must be mitigated to lower the high saving rate in China, and growth will be unaffected by lowering both inequality and saving.

Keywords: China; Saving; Growth; Inequality; SVAR; Global imbalances (search for similar items in EconPapers)
JEL-codes: D12 D31 D91 E21 J10 O16 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:850-857

DOI: 10.1016/j.econmod.2013.06.001

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