Household Savings Rate Research Articles

Low carbon growth in China: The role of emissions trading in a transitioning economy

China’s leaders are increasingly committed to low-carbon economic development. Although China’s economy has dramatically transformed since the initiation of economic reforms in 1978, it is still structurally different from post-industrial, high-income countries, and economic reform is ongoing. At the same time, China is taking major steps towards regulating its carbon dioxide emissions. China is currently preparing to implement a national carbon dioxide emissions trading system (ETS), which will be the largest ETS in the world. Our analysis demonstrates how these major economic and emissions policies are linked in China’s economy. We use a dynamic computable general equilibrium (CGE) model of China’s economy to simulate the interaction between a structural transition policy and a national ETS. We demonstrate an important policy instrument – the household savings rate – for stimulating economic transition. We show that by increasing consumption in lower emissions-intensity sectors, China can sustain growth in its economy while reducing emissions and transitioning to a more OECD-like economic structure. In addition, emissions reductions from an ETS regulation can be achieved at a lower cost for regulated firms when taking into account the changing structure of the economy.

Social Norms and Household Savings Rates in China

AbstractWe study the effects of Confucian social norms on savings rates in China. In our simple two-period model, parents have the option to invest in either a risk-free asset or their children’s human capital. We assume that the filial piety norms and thus the enforcement mechanisms for supporting old-age parents differ across regions. Consequently, the probability of children’s non-performance of their repayment obligations to parents and the returns parents can expect from investing in their children vary. We test the model predictions using data from the China Household Finance Survey. We find that stronger Confucian social norms reduce the gap in the savings rate between families with sons and with daughters. Modeling default by children as a function of the prevailing social norms gives us the flexibility to study the impacts of declining Confucian influence on consumption–savings trends in China.

Religion, economic attitudes and household savings : Evidence from CGSS(2010)

What has been ignored by the traditional saving theoryis religion. Based on data of CGSS (Chinese General Social Survey, 2010), using the method of tobit and ordered logit regression, this paper finds that the saving propensity of religious believers is higher than that of non-believers, however, the household savings rate is lower than non-believers’. After replacing the generalized consumption with narrow consumption, including the folk beliefs into the religions and dividing the religions into native and foreign religions, the result still represents its robustness. For its reason, this paper finds that religious believers have different economic attitudes, and the stronger thrift awareness and risk aversion, and weaker financial responsibility lead to higher saving propensity while the stronger social responsibility makes lower household savings rate.

Confucianism, Social Norms and Household Savings Rates in China

We study the effect of (declining) Confucian social norms on human capital investment and savings rates in China. In our simple two-period model, parents have the option to invest in either a risk-free asset or the human capital of their child. We assume that social norms, and thus enforcement mechanisms, for supporting old-age parents may differ across regions. Consequently, these cultural norms for acceptable filial piety determine the probability of children’s non-performance on their repayment obligations to parents, which in turn affects the variation in returns that parents can expect from investing in their children. Modeling default by children as a function of the prevailing social norms gives us the flexibility to study the impact of the declining Confucian influence on China’s consumption-saving trends. Using data from the China Household Finance Survey, this paper adds to the current literature in several ways. First, we provide evidence to support the key assumption in the life-cycle hypothesis in Modigliani and Cao [2004] that parents view their children, especially sons, as a source of retirement income. Thus, parents’ investment in children’s human capital is not altruistic; nor are intergenerational transfers from adult children to old-age parents. Second, we offer an alternative explanation for high household savings in China. In addition to the One Child Policy and the gender imbalance-induced pressure to save more, the lack of financial development and the declining influence of Confucianism are also significant contributors to China’s rising savings rates.

Investor Perception towards Mutual Fund Investment-A Gender Based Study

India is one of the few countries in the world which, according to the World Bank, has a household savings rate that is greater than 30%. Despite this, investment options such as mutual funds and equity instruments have a very low penetration rate, especially among rural households. Although a rapid increase in mutual fund investments has been witnessed over the last few years, with an increase of 38.47% from March 2016 to March 2017 having been declared by AMFI, much can be done in this area. Mutual Funds can be a good way of initiating new investors to financial investment securities and the capital market. The objective of this study is to determine whether an association exists between gender and the various attributes of perception towards mutual fund investments. Findings of this study can help companies design better product offerings in order to improve the penetration rate of mutual fund investments.

Concepts and Measures of Saving: Selected Issues for South Africa

AbstractSouth African household savings rates have been declining steadily over the last five decades, raising concerns that the population structurally under‐saves. Against the background of new saving‐enhancing policy initiatives, this paper asks to what extent the concern is founded, and whether the measurement of saving is really appropriate to guide economic policy. Comparing different macroeconomic concepts and measurements of saving, we show that the measure of saving in the national accounts (the residual between income and expenditure) understates the household savings rate compared to other measures. Specifically, an alternative measure from the balance sheets (the change in wealth) yields a significantly higher and non‐declining figure. While households have not been “putting aside” their incomes, they have nevertheless grown richer, driven largely by the appreciation of asset valuations. We also examine the impact of taking non‐financial saving and wealth into account, and conclude that household sector saving on the aggregate is significantly higher than the national accounts suggest. However, these adjusted measures are most relevant for the upper tail of the income and wealth distribution, raising important distributional concerns.

Organization and Finance of China’s Health Sector

China has exploded onto the world economy over the past few decades and is undergoing rapid transformation toward relatively more services. The health sector is an important part of this transition. This article provides a historical account of the development of health care in China since 1949. It also focuses on health insurance and macroeconomic structural adjustment to less saving and more consumption. In particular, the question of how health insurance impacts precautionary savings is considered. Multivariate analysis using data from 1990 to 2012 is employed. The household savings rate is the dependent variable in 3 models segmented for rural and urban populations. Independent variables include out-of-pocket health expenditures, health insurance payouts, housing expenditure, education expenditure, and consumption as a share of gross domestic product (GDP). Out-of-pocket health expenditures were positively correlated with household savings rates. But health insurance remains weak, and increased payouts by health insurers have not been associated with lower levels of household savings so far. Housing was positively correlated, whereas education had a negative association with savings rates. This latter finding was unexpected. Perhaps education is perceived as investment and a substitute for savings. China’s shift toward a more service-oriented economy includes growing dependence on the health sector. Better health insurance is an important part of this evolution. The organization and finance of health care is integrally linked with macroeconomic policy in an environment constrained by prevailing institutional convention. Problems of agency relationships, professional hegemony, and special interest politics feature prominently, as they do elsewhere. China also has a dual approach to medicine relying heavily on providers of traditional Chinese medicine. Both of these segments will take part in China’s evolution, adding another layer of complexity to policy.

Asia Rising: Growth and Resilience in an Uncertain Global Economy

Asia Rising: Growth and Resilience in an Uncertain Global Economy. Edited by Hal Hill and Maria Socorro Gochoco-Bautista. Cheltenham, UK: Edward Elgar and Asian Development Bank, 2013. Pp. xvi + 424. Asia Rising takes stock of Asian economies in the aftermath of the 2008-09 Global Financial Crisis (GFC) and evaluates challenges and opportunities for continued growth. It opens with an editorial overview; continues with thematic chapters on a variety of topics linked by a common concern with investment; and concludes with country studies of Malaysia, Indonesia, India, China, Thailand and the Philippines. The seventeen contributing authors are economists either in regional academic institutions or at the Manila-based Asian Development Bank. The book's central concern is, in the editors' words, developing middle-income Asian countries maintain their economic dynamism and navigate through deep economic crises against the backdrop of continuing global uncertainty and instability (p. 3). The focus is on macroeconomic dimensions, notably in managing the inevitable slowdown from earlier decades of rapid growth and dealing with the effects of external economic challenges, like the GFC, that threaten to push domestic savings, investment and financial development off their desired paths. The primary contribution is to help us understand better how investment, the wellspring of economic growth, is affected by global shocks in a set of economies with imperfect markets, policies and institutions. Authors of the thematic chapters deploy a wide variety of methods and data. Chapter 2 by Emmanuel De Dios and Geoffrey Ducanes, entitled Institutions and Governance, deploys a linear regression model with a 164-country data set to investigate the influence of institutions on change in investment/GDP ratios from 1991-95 until 2002-06. They conclude that and institutional factors do exert an influence on investment in Asia and that they form part of the explanation of the observed investment behaviour in the region. Similarly, Chapter 3, by Douglas Brooks and Eugenia Go, sets up a Solow-type aggregate growth model and then proposes a large array of infrastructure investment proxies to be included as additional explanatory variables, in estimates based on a panel of 123 countries over the period 1971-2005. They report (among other things) that investments in telecomms, road and air transport systems and energy consumption all support economic growth. However, this chapter reports neither data nor econometric results, so it is impossible to evaluate the authors' claims. More generally, the use of global data sets and generic models in both these chapters makes it a priori difficult to identify phenomena specific to developing Asia. In other thematic chapters, Kyoji Fukao (Chapter 4) sets up a dynamic macro growth model and uses it to evaluate the likely impacts of an exogenous drop in productivity growth on capital accumulation and other indicators of economic structure and performance. Charles Horioka and Akiko Terada-Hagiwara (Chapter 5) and Shin-ichi Fukuda (Chapter 6) present careful examinations of Asian (rather than global) cross-country data to explore, respectively, the role of demographic trends as drivers of household savings rates, and the contribution of financial development to investment growth. Diane Desierto (Chapter 7) presents a textual analysis of ASEAN investment treaties. The six country chapters document responses to the 1997-98 Asian Financial Crisis (AFC) and GFC, taking a more narrative approach. Chapters on China (by Siow Yue Chia) and Thailand (Bhanupong Nhidiprabha) are both very nice examples of near-term macroeconomic history. As with the earlier chapters, a concern with investment (or, in some cases, the lack of it) is common to nearly all the country chapters. Several make the point that domestic investment rates were quick to decline, yet slow to recover during the 2000s for reasons that went well beyond the AFC itself to deeper weaknesses, notably the lack of complementary infrastructure or governance institutions. …

Regression Analysis of Factors Influencing Volume of Households' Savings in the V4 Countries

In the Visegrad Four countries (V4) as well as all across the Euro area the household savings rate declined to a level of 12,8% in 2014, despite the fact that the real household income per capita in the Euro area increased by 0,2 %. Aim of the submitted article concerns the empirical analysis of the relationship between savings and selected macroeconomic factors. The analysis provides a complete view to assess developments in household savings in the Visegrad Four countries within the period 2005–2014 and subsequently assess the impact of selected macroeconomic factors using multivariate regression analysis. Analysis solves linear relationship between savings as a dependent variable, and independent variables such as disposable income, gross domestic product, unemployment rate and inflation rate. Results of the analysis confirmed that a statistically significant model parameters and the most important determinant with strongly positive impact in all the surveyed countries was the disposable income. DOI: 10.5901/mjss.2016.v7n1p213

Dochód i wykształcenie jako determinanty stopy oszczędności gospodarstw domowych w Polsce

Dochód i wykształcenie jako determinanty stopy oszczędności gospodarstw domowych w Polsce

Endogenous Savings Rate with Forward-Looking Households in a Recursive Dynamic CGE Model: Application to South Africa

In the vast majority of recursive dynamic CGE models, the savings rate is constant and exogenous. Intertemporal CGE models, by contrast, are solved simultaneously for all periods, and agents optimize intertemporally. But the theoretical consistency of intertemporal optimization is achieved only at the cost of more aggregated, less detailed models, due to computational limitations. In some applications, therefore, recursive dynamics should be preferred to intertemporal dynamics for practical reasons of computability. This paper presents a recursive dynamic CGE model in which households determine their savings rate from intertemporal optimization, by solving a simplified form of their intertemporal problem. This approach we call truncated rational expectations (TRE). In the TRE framework, households have rational expectations for the current period and the following one. Accordingly, the model is solved simultaneously for two periods at a time, the current period and the following one. Household (rational) expectations for period 1 are given by the model solution. For subsequent periods, household expectations are formed by extrapolating from and 1 solution values, assuming a constant rate of change. The TRE framework is implemented in a modified version of the Decaluwe et al. (2013) PEP-1-t model, and applied to South Africa, using a 2005 SAM by Davies and Thurlow (2011). Several simulations are run, with two variants of the 2005 SAM, the original one and a modified one with a high initial household savings rate. The results are compared with those of a static expectations model with intertemporal optimization, and of a fixed-savings rate model. The main difference is that in the first two models, the household savings rate is not constant, even in the BAU scenario. It is also responsive to changes in the rate of return on assets. On the other hand, an exogenous reduction in household wealth has very little effect.

Brothers, household financial markets and savings rate in China

This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household savings rate by at least 5 percentage points. Brothers help households (1) by sharing risks, providing a source of informal borrowing, and (2) by sharing the cost of supporting parents. Sisters play a minor role in affecting a household's savings rate, mainly because of cultural norms. The decline in the average number of brothers in households induced by population policies explained at least one-third of the increased aggregate household savings rate in urban China.

Determinants of Household Savings in South Africa: An Econometric Approach (1990-2011)

This paper examines the determinants of household savings in South Africa over the period 1990-2011. Based on the life cycle hypothesis upon which the study is based as well as empirical literature, particular attention is paid to the effects of age dependency ratio, the level of household income, inflation and real interest rate on household savings. The study employs the Augmented Dickey-Fuller and Phillips Perron unit root tests to test for stationarity in the time series. The Johansen co-integration and the Error Correction Mechanism are employed to identify the long-run and short-run dynamics among the variables. The results of the study reveal that contrary to a theoretical expectation, the level of income and household savings are negatively related, implying that South African households do not only save but increasingly rely on debt to finance their spending. On the other hand age dependency ratio, inflation and real interest rate have positive long run relationships with household savings rate. The study recommends that the government should embark on counter-cyclical fiscal policy to avoid the development of excessive current account deficits during periods of more rapid economic growth, rising investment and falling saving. DOI: 10.5901/mjss.2014.v5n15p183

Savings and economic growth in South Africa: A multivariate analysis

Growth theories highlight the importance of domestic savings for Economic growth. The savings and growth literature points generally to a positive growth effect of domestic savings. For a country like South Africa, where the level of domestic saving is low, the question of the role of savings in economic growth becomes critical. An understanding of the contribution of the different forms of savings in an economy to its economic growth is important, especially to be able to make the proper policy addresses. This paper applies cointegration analysis within a multivariate framework to establish the effect of household, government and corporate savings on economic growth in South Africa. The result indicates that corporate saving has a significant positive relationship to growth in both the long and short run, while household and government saving have no significant impact on growth. There is need for policies that increase the level of domestic savings and also a need to address government policies that impact on both public and household savings rate.

The Making of America's Imbalances

This paper tracks the development of sectoral saving and borrowing in the US economy over the past 50 years. We show that the financial imbalances that erupted in the financial crisis of 2008 were long in the making and preceded the emergence of global imbalances in the 2000s. The record low household savings rate in the past decade was the product of two separate trends: a sharp fall in the asset acquisition of American households in the 1990s, and an explosion of mortgage borrowing in the 2000s. We present novel disaggregated estimates of the wealth effect on savings. We show that households reduce active savings in response to gains in financial wealth and increase borrowing with rising housing wealth. Finally, we argue that the American credit boom of the 2000s had few direct links to reserve accumulation in emerging markets. The mortgage boom was financed by the US financial sector which intermediated foreign funds from private sources.

The Making of America's Imbalances

This article tracks the history of sectoral saving and borrowing in the US economy over the past 50 years. We show that the financial imbalances that erupted in the financial crisis of 2008 were long in the making and preceded the emergence of global imbalances in the 2000s. These new dynamics in the household sector were already apparent in the 1990s, long before the deterioration in the US government balance or the current account balance and long before the arrival on the international stage of Chinese reserve accumulation. The record low household savings rate in the past decade was the product of two separate trends: a sharp fall in the asset acquisition of American households in the 1990s, and an explosion of mortgage borrowing in the 2000s. The American credit boom of the 2000s had few direct links to reserve accumulation in emerging markets. The mortgage boom was financed by the US financial sector, which intermediated foreign funds from ‘private’ sources. (JEL codes: E21, E22, F32, N10, N12)

Modelling the Impact of Economic, Demographic and Social Determinants on Household Saving Rate in the Former Socialist Countries (Central and Eastern Europe)

The main sector of a national economy that saves is the household sector. Its saving behaviour is determined by a complex of economic, social, demographic and cultural factors. Their determination is of utmost importance for the foundation of the policies aimed at stimulating household savings.Identification of the main determinants of population savings is done using panel data for 6 European countries for the 1995-2010 period.The present paper aims at analysing and modelling the saving behaviour of the households in the Central and Eastern Europe. Due to the fact that the countries in Eastern Europe, unlike the other European states, are affected not only by the world financial crisis, but also by the transition to market economy after 45 years of hyper-centralized model of the socialist economy.The empirical results obtained are quantified with the help of a fixed-country-specific effect model that estimates the net saving rate. The model allowed for highlighting some individual particularities of the countries and groups of countries, showing that the type of saving behaviour is influenced by them.

Endogenous Savings Rate with Forward-Looking Households in a Recursive Dynamic CGE Model: Application to South Africa

In the vast majority of recursive dynamic CGE models, the savings rate is constant and exogenous. Intertemporal CGE models, by contrast, are solved simultaneously for all periods, and agents optimize intertemporally. But the theoretical consistency of intertemporal optimization is achieved only at the cost of more aggregated, less detailed models, due to computational limitations. In some applications, therefore, recursive dynamics should be preferred to intertemporal dynamics for practical reasons of computability. This paper presents a recursive dynamic CGE model in which households determine their savings rate from intertemporal optimization, by solving a simplified form of their intertemporal problem. This approach we call « truncated rational expectations » (TRE). In the TRE framework, households have rational expectations for the current period and the following one. Accordingly, the model is solved simultaneously for two periods at a time, the current period ? and the following one. Household (rational) expectations for period ? +1 are given by the model solution. For subsequent periods, household expectations are formed by extrapolating from ? and ? +1 solution values, assuming a constant rate of change. The TRE framework is implemented in a modified version of the Decaluwe et al. (2013) PEP-1-t model, and applied to South Africa, using a 2005 SAM by Davies and Thurlow (2011). Several simulations are run, with two variants of the 2005 SAM, the original one and a modified one with a high initial household savings rate. The results are compared with those of a static expectations model with intertemporal optimization, and of a fixed-savings rate model. The main difference is that in the first two models, the household savings rate is not constant, even in the BAU scenario. It is also responsive to changes in the rate of return on assets. On the other hand, an exogenous reduction in household wealth has very little effect.

Housing price and household savings rates: evidence from China

This article investigates the effect of house prices on household savings rates in urban China employing the 2002 and 2007 data of the Chinese Households Income Project (CHIP). We find that the rapid appreciation of house prices cannot explain high Chinese households’ savings rates and the rising of Chinese savings rates. On the contrary, we find a negative relationship between house prices and household savings rates for home renters and homeowners. We do not find any evidence of ‘savings for housing purchase’ for young home renters when house prices increase. Their savings rates declined during housing market booms in recent 10 years. Savings rates of homeowners possessing multiple housing have decreased more because of ‘the pure housing wealth effects.’

House Prices and Household Saving Rate: Evidence from China

In the last decade, China’s house prices have skyrocketed along with its continually rising household saving rate. Can rising house prices be an important contributor to the increase in household saving rate? Using data from an urban household survey in China, we find that, on average, local house prices do not significantly change household saving rate, regardless of whether housing expenditure is classified as current consumption. When house prices increase, however, households with single male adults, house renters, and owners of homes with below-average value show a significant increase in saving rate. By contrast, households with single female adults and owners of homes with above-average value do not show changes in saving rate.