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The One-Child Policy and Household Savings in China

Author

Listed:
  • Keyu Jin

    (London School of Economics)

  • Nicolas Coeurdacier

    (SciencesPo Paris)

Abstract
This paper analyzes the impact of the 'one child policy' in China on its household saving behavior. First, it develops a life-cycle model with endogenous fertility, intergenerational transfers and human capital accumulation. We show a macroeconomic and a microeconomic channel of a fall in fertility on raising aggregate household saving: at the macroeconomic level, the population composition shifts initially towards the middle-aged—the high savers of the economy. At the microeconomic level, (1) expenditures of children fall—despite higher education investment in each child—as quantity substitutes for quality; (2) middle-aged save additionally for retirement in anticipation of reduced transfers from their only child. Second, our quantitative model implies policy-induced changes in aggregate savings and age-saving profiles broadly consistent with estimates from Chinese household-level data. Third, an empirical study using the birth of twins as a source of exogenous increase in fertility is shown to support the micro-economic channels we highlight. Overall, our estimation suggests that the policy is able to account for 30% to 50% of the rise in household savings rate since its implementation in 1980.

Suggested Citation

  • Keyu Jin & Nicolas Coeurdacier, 2013. "The One-Child Policy and Household Savings in China," 2013 Meeting Papers 790, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:790
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    References listed on IDEAS

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    Cited by:

    1. David Howden & Yang Zhou, 2014. "China's One-Child Policy: Some Unintended Consequences," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 353-369, October.
    2. Andrés Fernández & Ayşe İmrohoroğlu & Cesar E. Tamayo, 2019. "Saving Rates in Latin America: A Neoclassical Perspective," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(4), pages 791-823, December.
    3. Jingting Fan & Sebnem Kalemli-Ozcan, 2016. "Emergence of Asia: Reforms, Corporate Savings, and Global Imbalances," NBER Working Papers 22334, National Bureau of Economic Research, Inc.
    4. Mark Rosenzweig & Junsen Zhang, 2014. "Co-residence, Life-Cycle Savings and Inter- Generational Support in Urban China," Working Papers 1039, Economic Growth Center, Yale University.
    5. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    6. Zhongchen Song & Tom Coupe & W. Robert Reed, 2019. "The One-Child Policy and Chinese Saving Behavior," Working Papers in Economics 19/10, University of Canterbury, Department of Economics and Finance.
    7. Curtis, Chadwick C. & Lugauer, Steven & Mark, Nelson C., 2017. "Demographics and aggregate household saving in Japan, China, and India," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 175-191.
    8. Cubizol, Damien, 2018. "Transition and capital misallocation: the Chinese case," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 88-115.
    9. Howden, David & Zhou, Yang, 2014. "Unintended Consequences of China´s One-Child Policy," MPRA Paper 79607, University Library of Munich, Germany.
    10. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "Intergenerational transfers and China’s social security reform," The Journal of the Economics of Ageing, Elsevier, vol. 11(C), pages 62-70.

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