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Public pension and household saving: evidence from China

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  • Feng, Jin
  • He, Lixin
  • Sato, Hiroshi

Abstract

We relate household saving to pension reform, to explain the high household saving rates in urban China from a new perspective. We use the exogenous - policy induced - variation in pension wealth to explicitly estimate the impact of pension wealth on household saving, and obtain a significant offset effect of pension wealth on household saving. Our estimations show that pension reform boosted the household saving rate in 1999 by about 6 percentage points for cohort aged 25-29 and by about 3 percentage points for cohort aged 50-59. Our results also indicate that declining pension wealth reduces expenditure on education and health more than on other consumption items.

Suggested Citation

  • Feng, Jin & He, Lixin & Sato, Hiroshi, 2009. "Public pension and household saving: evidence from China," BOFIT Discussion Papers 2/2009, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2009_002
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    References listed on IDEAS

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    More about this item

    Keywords

    pensions; pension reform; household savings rate; China;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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