Income Uncertainty and Household Savings in China

Marcos Chamon (), Kai Liu and Eswar Prasad

No 5331, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: China's household saving rate has increased markedly since the mid-1990s and the age-saving profile has become U-shaped. Using a panel of urban Chinese households covering 1989-2006, we document a sharp increase in income uncertainty. While the permanent variance of household income was stable, the transitory variance rose sharply. Based on these estimates, we calibrate a buffer-stock savings model and show that rising income uncertainty and pension reforms lead younger and older households, respectively, to raise their saving rates. These two factors account for over half of the increase in China's urban household savings rate and the U-shaped age-profile of savings.

Keywords: household savings; income uncertainty; pension reforms; buffer-stock savings; China (search for similar items in EconPapers)
JEL-codes: D91 E21 J3 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-11
New Economics Papers: this item is included in nep-cna and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Published - published in: Journal of Development Economics, 2013, 105, 164-177

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Related works:
Journal Article: Income uncertainty and household savings in China (2013)
Working Paper: Income Uncertainty and Household Savings in China (2010)
Working Paper: Income Uncertainty and Household Savings in China (2010)
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