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In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, (in many cases) the real interest rate, and (in some cases) the inflation rate. However, we find that the variables relating to the age structure of the population have the expected impact on the household saving rate in only one of the four samples. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.

The article analyses the rise in household indebtedness from the point of view of its causes and long-run macroeconomic implications. The analysis is focussed on the US case. Differently from life-cycle interpretations of the phenomenon, and from interpretations in terms of erratic deviations of current income flows from their long-run trend, the rising household debt is viewed as the outcome of persistent changes in income distribution and growing income inequalities. Through household debt, low wages appear to have been brought to coexist with relatively high levels of aggregate demand, thus providing the solution to the contradiction between the necessity of high and rising consumption levels, for the growth of the system's actual output, and a framework of antagonistic conditions of distribution which keeps within limits the real income of the vast majority of society. The question of the long-run sustainability of this substitution of loans for wages is finally discussed.

Computable general equilibrium (CGE) models and \"convergence models\" differ in their assessment of the extent to which demography influences economic growth. Here, I show that CGE models produce results similar to those of convergence models when more detailed demographic information is used. To do so, I implement a CGE model to explain Taiwan's economic miracle during the period 1965-2005. I find that Taiwan's demographic transition accounts for 22 % of per capita output growth and 17.7 % of investment rate for the period 1965-2005. Moreover, this paper confirms most of the literature written on the role of demography on per capita output growth and saving rates since the seminar article by Coale and Hoover (1958).

Languages differ widely in the ways they encode time. I test the hypothesis that the languages that grammatically associate the future and the present, foster future-oriented behavior. This prediction arises naturally when well-documented effects of language structure are merged with models of intertemporal choice. Empirically, I find that speakers of such languages: save more, retire with more wealth, smoke less, practice safer sex, and are less obese. This holds both across countries and within countries when comparing demographically similar native households. The evidence does not support the most obvious forms of common causation. I discuss implications for theories of intertemporal choice.

The high and rising household savings rate in China is not easily reconciled with the traditional explanations that emphasize life cycle factors, the precautionary saving motive, financial development, or habit formation. This paper proposes a new competitive saving motive: as the sex ratio rises, Chinese parents with a son raise their savings in a competitive manner in order to improve their son’s relative attractiveness for marriage. The pressure on savings spills over to other households. Both cross-regional and household-level evidence supports this hypothesis. This factor can potentially account for about half the actual increase in the household savings rate during 1990–2007.

Defaults often have a large influence on consumer decisions. We identify an overlooked but practical alternative to defaults: requiring individuals to make explicit choices for themselves. We study such \"active decisions\" in the context of 401(k) saving. We find that compelling new hires to make active decisions about 401(k) enrollment raises the initial fraction that enroll by 28 percentage points relative to a standard opt-in enrollment procedure, producing a savings distribution three months after hire that would take thirty months to achieve under standard enrollment. We also present a model of 401(k) enrollment and derive conditions under which the optimal enrollment regime is automatic enrollment (i.e., default enrollment), standard enrollment (i.e., default nonenrollment), or active decisions (i.e., no default and compulsory choice). Active decisions are optimal when consumers have a strong propensity to procrastinate and savings preferences are highly heterogeneous. Financial illiteracy, however, favors default enrollment over active decision enrollment.

We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints—more severe in fast-growing countries—can explain three prominent global trends: a divergence in private saving rates between advanced and emerging economies, large net capital outflows from the latter, and a sustained decline in the world interest rate. Micro-level evidence on the evolution of age-saving profiles in the US and China corroborates our mechanism. Quantitatively, our model explains about a third of the divergence in aggregate saving rates, and a significant portion of the variations in age-saving profiles across countries and over time.

We revisit to what extent the increase in income inequality since 1980 was mirrored by consumption inequality. We do so by constructing an alternative measure of consumption expenditure using a demand system to correct for systematic measurement error in the Consumer Expenditure Survey. Our estimation exploits the relative expenditure of high- and low-income households on luxuries versus necessities. This double differencing corrects for measurement error that can vary over time by good and income. We find consumption inequality tracked income inequality much more closely than estimated by direct responses on expenditures.

Analyzing the savings behavior of a large sample of identical and fraternal twins, we find that genetic differences explain about 33 percent of the variation in savings propensities across individuals. Individuals are born with a persistent genetic predisposition to a specific savings behavior. Parenting contributes to the variation in savings rates among younger individuals, but its effect decays over time. The environment when growing up (e.g., parents’ wealth) moderates genetic effects. Finally, savings behavior is genetically correlated with income growth, smoking, and obesity, suggesting that the genetic component of savings behavior reflects genetic variation in time preferences or self-control.

Behavioral economics can be scaled up to have a major, positive impact on certain behaviors, such as retirement savings. Many countries are facing a retirement savings crisis. In the United States, for example, the fraction of workers at risk of having inadequate funds to maintain their lifestyle through retirement is estimated to have increased from 31% to 53% from 1983 to 2010 ( 1 ). Roughly half of U.S. employees (78 million) have no access to retirement plans at their workplace ( 2 ). Fortunately, there are solutions to these problems. We simply have to change the choice architecture of retirement plans by utilizing the findings of behavioral economics research ( 3 ) and make such plans available to all workers. We describe a large-scale field demonstration of the potential impact of such research-based changes in how we save.