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A Sexually Unbalanced Model of Current Account Imbalances

Qingyuan Du and Shang-Jin Wei

No 16000, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists, transformation in many of these societies, namely, a steady increase in the surplus of men relative to women. We construct an OLG model with two sexes and a desire to marry. We show conditions under which an intensified competition in the marriage market can induce men to raise their savings rate, and produce a rise in the aggregate savings and current account surplus. This effect is economically significant if the biological desire to have a partner of the opposite sex is strong. A calibration of the model suggests that this factor could generate economically significant current account responses, or more than 1/2 of the actual current account imbalances observed in the data.

JEL-codes: E2 F3 F32 F41 (search for similar items in EconPapers)
Date: 2010-05
Note: IFM
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