This paper examines the impact of family size on household saving. We first study a theoretical life-cycle model that includes finite lifetimes and saving for retirement and in which parents care about the consumption by their dependent children. The model implies a negative relationship between the number of dependent children in the family and the household saving rate. Then, we test the model's implications using new survey data on household finances in China. We use the differential enforcement of the one-child policy across counties to address the possible endogeneity between household saving and fertility decisions in a two-stage least squares Tobit regression. We find that Chinese families with fewer dependent children have significantly higher saving rates. The data yields several additional insights on household saving patterns. Households with college-age children have lower saving rates, and households residing in urban areas have higher saving rates and a lower ratio of education expenditures to income. However, having an additional child reduces saving rates more for households in urban areas than in rural areas. Our regressions also indicate that saving rates vary with age and tend to be higher for households with more workers, higher education, better health, and more assets.
|Journal||China Economic Review|
|State||Published - Oct 2019|
Bibliographical noteFunding Information:
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. We thank seminar participants at the University of Notre Dame, University of Nebraska at Omaha, Zhejiang University, Jinan University, the 2015 Chinese Economists Society Conference (Ann Arbor), the 2015 World Congress of Comparative Economics (Rome), the 2016 Chinese Economists Society Conference (Sacramento), and the 2016 ASSA meetings (San Francisco) for their helpful comments.
© 2019 The Authors
- Household saving
- Overlapping generations
ASJC Scopus subject areas
- Economics and Econometrics