Keeping up with the Zhangs: Relative income and wealth, and household saving behavior

Noam Gruber

Journal of Macroeconomics, 2018, vol. 55, issue C, 77-95

Abstract: Research has shown high income households to have high saving rates. Using detailed Chinese household survey data, this study demonstrates that saving rates are determined by relative, rather than absolute, income level. Specifically, households with higher than the average income in their locality save a larger fraction of their income. To explain this finding, this study proposes a utility function that incorporates both relative consumption and relative wealth. This function not only generates higher saving rates by relatively high income households, but also predicts the observed correlation between economic growth and the aggregate saving rate on the national level.

Keywords: Household saving; Life cycle models and saving; Wealth effects; Relative income hypothesis; Saving growth; Chinese savings (search for similar items in EconPapers)
JEL-codes: D14 D91 E21 F43 O12 O53 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:55:y:2018:i:c:p:77-95

DOI: 10.1016/j.jmacro.2017.10.001

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