Ayse Imrohoroglu, University of Southern California, and Kai Zhao, University of Connecticut

The Chinese Savings Rate: Productivity, Old-Age Support, and Demographics
 

In this paper, Imrohoroglu and Zhao show that a general equilibrium model that properly captures the role of family support, changes in demographics and the productivity growth rate is capable of generating changes in the national saving rate in China that mimic the data well. The researchers' results suggest that most of the increase in the saving rate between 1980 and 2010 is due to the interaction between the decline in the fertility rate due to the one-child policy and the shortcomings of the old-age support programs, especially against the long-term care risks, provided by the government in China. Changes in the productivity growth rate account for the fluctuations in the saving rate during this period.