Academic

How to Make Americans Save More? Get Rid of the Women.

By Kim Krawiec

Much has been made during the recent economic crisis of the vast difference in household savings rates between the United States and China.  The difference has led to the somewhat incongruous outcome of massive lending from an emerging economy to industrialized ones, particularly the United States.  Although explanations ranging from economic uncertainty and changes in the pension system have been offered, a new NBER working paper by Shang-Jin Wei and Xiaobo Zhang suggests a far more blog-worthy explanation:  marriage market competition fueled by gender imbalances arising from sex selection practices in China.

From the New York Times, which quotes from the paper:

?Families with sons compete with each other to raise their savings rate in response to ever-rising pressure in the marriage market. Competitive saving by these families spills over to greater savings by other families, possibly through raising the prices of nontradable goods such as housing.?                                                                                                     

?Across Chinese provinces, there is clear evidence that local savings rates tend to be higher in regions with more unbalanced sex ratios.?                                                                                                                                                                                                                                                     

In other words, parents want their sons to marry, and they figure that girls are more likely to want to marry rich boys.                                                                                                                         

The authors note that while they looked only at China, ?other economies known to have a strong sex ratio imbalance include Korea, Taiwan, Hong Kong, Singapore and India. These countries also happen to have high savings rates.?

(HT: Tyler Cowen)

Full post as published by The Faculty Lounge on June 27, 2009 (boomark / email).