Article ID Journal Published Year Pages File Type
7366861 Journal of Macroeconomics 2018 41 Pages PDF
Abstract
Research has shown high income households to have high saving rates. Using detailed Chinese household survey data, this study demonstrates that saving rates are determined by relative, rather than absolute, income level. Specifically, households with higher than the average income in their locality save a larger fraction of their income. To explain this finding, this study proposes a utility function that incorporates both relative consumption and relative wealth. This function not only generates higher saving rates by relatively high income households, but also predicts the observed correlation between economic growth and the aggregate saving rate on the national level.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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