Precautionary Saving of Chinese and U.S. Households

Horag Choi, Steven Lugauer and Nelson Mark

No 20527, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We employ a model of precautionary saving to study why household saving rates are so high in China and so low in the US. The use of recursive preferences gives a convenient decomposition of saving into precautionary and non precautionary components. This decomposition indicates that over 80 percent of China's saving rate and nearly all of the US saving arises from the precautionary motive. The difference in the income growth rate between China and the US is vastly more important for explaining saving rate differences than differences in income risk. We estimate the preference parameters and find that Chinese and US households are more similar in their attitude toward risk than in their intertemporal substitutability of consumption.

JEL-codes: E21 F4 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-cna, nep-mac, nep-tra and nep-upt
Note: DEV IFM ME
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Citations: View citations in EconPapers (10)

Published as HORAG CHOI & STEVEN LUGAUER & NELSON C. MARK, 2017. "Precautionary Saving of Chinese and U.S. Households," Journal of Money, Credit and Banking, vol 49(4), pages 635-661.

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