Household Finance in China

Russell Cooper, Guozhong Zhu

NBER Working Paper No. 23741
Issued in August 2017, Revised in January 2018
NBER Program(s):Economic Fluctuations and Growth

This paper uses a lifecycle model to study household finance in China, focusing on the high savings rate, the low stock market participation rate and the low share of stocks in wealth. We control for important regime changes in China in the estimation of structural parameters, and examine their impacts on household finance patterns. Relative to the US, the distinctive financial choices of households in China are driven by institutional factors, such as labor market risks and costs of asset market participation, as well as by differences in preferences. Specifically, large stock market participation and adjustment costs along with high stock market volatility in China lead to the relatively low stock market participation rate and the low share of stocks in wealth conditional on participation, but they contribute little to the high savings rate. The high savings rate in China is driven mainly by high labor market risks and the patience of households. Given the estimated differences between China and the US in preferences, the model predicts that households in China would continue to save more than their US counterparts even if institutional differences disappear.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23741

Users who downloaded this paper also downloaded* these:
Chen, He, and Liu w23598 The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes
Fan, Li, and Yeaple w23690 On the Relationship Between Quality and Productivity: Evidence from China's Accession to the WTO
Piketty, Yang, and Zucman w23368 Capital Accumulation, Private Property and Rising Inequality in China, 1978-2015
Barrero, Bloom, and Wright w23676 Short and Long Run Uncertainty
Clark, Pinkovskiy, and Sala-i-Martin w23323 China's GDP Growth May be Understated
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us