How Does Public Sector Employment Affect Household Saving Rates? Evidence from China

Wed, 01 Jan 2025 00:00:00 +0000

Research question and motivation: The paper asks whether and why the type of employment — specifically public-sector employment — affects household saving rates in China. This matters because Chinese household saving rates are extraordinarily high in international comparison (the paper reports an average gross household saving rate of roughly 35% in China versus only about 5% in OECD countries over the period considered), and the high rates remain a puzzle. Household saving feeds investment and long-run growth, its cyclicality can amplify or dampen crises, and via the “global saving glut” hypothesis Chinese saving has financed global imbalances and the US current account deficit. Prior literature on Chinese saving emphasizes economic transition, income growth/uncertainty, demographics (one-child policy), and culture, but neglects the role of employment type. Notably, the international finding (e.g., Bettoni and Santos, 2021, calibrated on Brazilian data) is that public employment REDUCES saving because of lower job/income uncertainty and higher compensation, so less precautionary saving. China appears to run the opposite way.

Andreas Steiner | Macro Paper Warehouse

How Does Public Sector Employment Affect Household Saving Rates? Evidence from China