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The Price of Growth: Consumption Insurance in China 1989-2009

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  • Santaeulàlia-Llopis, Raül ; Zheng, Yu

Abstract

The welfare gains of economic growth hinge on the ability of households to insure consumption against the risks associated with growth. We exploit a novel and unique opportunity to study this question using China, an economy that has witnessed enormous and sustained growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that triples from 1989 to 2009. The loss of consumption insurance has implications for the welfare assessment of economic growth across time and across space.

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  • Santaeulàlia-Llopis, Raül ; Zheng, Yu, 2016. "The Price of Growth: Consumption Insurance in China 1989-2009," Economics Working Papers ECO2016/13, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2016/13
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    Keywords

    Income Risk; Consumption Insurance; Growth; Welfare; China;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • D1 - Microeconomics - - Household Behavior

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