 Can income inequality explain China’s saving puzzle?Tianshu Chu and Qiang Wen International Review of Economics & Finance, 2017, vol. 52, issue C, 222-235 Abstract: Since the beginning of 21st century, China has experienced increasing aggregate saving rates as well as increasing income inequality simultaneously. In this paper, we explore the possible linkage between rising saving rates and rising income inequality. We first characterize China’s saving behavior using household survey data, finding that households with high income save at higher rates. We then derive analytically that the saving rate relates with income inequality index in a nonlinear way, in particular, the aggregate saving rate is a linear function of interaction term of the average income level and squared income inequality indicator, and the level value of average income. We conduct median regression analysis using community level data, finding that aggregate saving rates are increasing in income inequality, in particular, the higher the income inequality, the greater the marginal effect of income inequality on aggregate saving rates. This research has policy implication that the effective way to promote China’s domestic demand is through promoting a more equal distribution of income. Keywords: Income inequality; Aggregate saving rates; Median regression (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:52:y:2017:i:c:p:222-235 DOI: 10.1016/j.iref.2017.01.010 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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