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Social Insurance and Household Consumption in China

In: The Chinese Economy

Author

Listed:
  • Chong-En Bai

    (Tsinghua University)

  • Binzhen Wu

    (Tsinghua University)

Abstract

The Chinese household saving rate has been high and continually rising in recent years. The household saving rate rose by about ten percentage points from 1995 to 2008 and reached 28 per cent in 2008. This increase is higher than that observed in most other countries, including East Asian nations (Prasad 2009). This phenomenon, referred to as the Chinese saving puzzle, has been the subject of considerable international attention. Literature has provided many different explanations for the high saving rate in China. One of the most popular is related to the lack of a generous safety net in the country (Chamon and Prasad 2010; Meng 2003). In particular, people reduce consumption due to the income or expenditure risks associated with retirement, medical expenses and/or children’s education. The uncertainty about future status elicits more savings than the level that can smooth consumption in the case of no uncertainty. This is defined as the precautionary saving motive.

Suggested Citation

  • Chong-En Bai & Binzhen Wu, 2012. "Social Insurance and Household Consumption in China," International Economic Association Series, in: Masahiko Aoki & Jinglian Wu (ed.), The Chinese Economy, chapter 8, pages 166-195, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-137-03429-8_9
    DOI: 10.1057/9781137034298_9
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    Cited by:

    1. Cheng, Zhiming, 2021. "Education and consumption: Evidence from migrants in Chinese cities," Journal of Business Research, Elsevier, vol. 127(C), pages 206-215.

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