Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 17/2013: China's Savings Multiplier
Halvor Mehlum (), Ragnar Torsvik () and Simone Valente ()
Additional contact information
Halvor Mehlum: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Ragnar Torsvik: Norwegian University of Science and Technology, Postal: Norwegian University of Science and Technology Department of Economics , Dragvoll , N-7491 Trondheim, Norway
Simone Valente: Norwegian University of Science and Technology, Postal: Norwegian University of Science and Technology Department of Economics , Dragvoll , N-7491 Trondheim, Norway
Abstract: China's growth is characterized by massive capital accumulation, made possible by high and increasing domestic savings. In this paper we develop a model with the aim of explaining why savings rates have been high and increasing, and we investigate the general equilibrium effects on capital accumulation and growth. We show that increased savings and capital accumulation stimulates further savings and capital accumulation, through an intergenerational distribution effect and an old-age requirement effect. We introduce what we term the savings multiplier, and we discuss why and how the one-child policy, and the dismantling of the cradle-to-grave social benefits provided through the state owned enterprises, have stimulated savings and capital accumulation.
Keywords: China; One-child policy; Overlapping generations; Growth; Savings
52 pages, July 4, 2013
Full text files
memo-17-2013.pdf
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