Monday, June 29, 2009

Why Do Chinese Save?

Because the boys want to marry:

The high Chinese savings rate has been one of the wonders of the world. The household savings rate, as a proportion of disposable income, is 30 percent, and has been rising rapidly in recent years. That figure is twice as high as the highest rate ever recorded in the United States.

Traditional explanations for varying savings rates, such as life cycles — working age people save more — and income uncertainty, do not help much in explaining the rapid rise in China.

Now two economists say they have found a reason that explains a large part of the increase. China has too many boys...

The authors note that while they looked only at China, “other economies known to have a strong sex ratio imbalance include Korea, Taiwan, Hong Kong, Singapore and India. These countries also happen to have high savings rates.”

Read the working paper here.

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