The Competitive Savings Motive: Evidence from Rising Sex Ratios and Savings Rates in China

Xiaobo Zhang
Shang-Jin Wei

High savings rates in many countries are a major factor in the global current account
imbalances. The Chinese savings rate has been high and rising, contributing to one of the
world’s largest and fast-growing current account surpluses. The life cycle theory and
precautionary savings motive, in spite of their popularity, are not compatible with recent
time series patterns. The paper tests a new hypothesis based on a biological savings
motive: a high and rising sex ratio imbalance, by increasing the competition by men in
the marriage market, may have induced the Chinese to postpone consumption
significantly in favor of wealth accumulation. We report both “macro” and “micro”
evidence in support of the hypothesis. First, across provinces, local saving rates are found
to be strongly positively associated with local sex ratio imbalances, after accounting for
demographics, social safety net and other factors. The relationship continues to hold with
an instrumental variable approach. Second, across households, those with a son tend to
save more in regions with a more skewed sex ratio, holding constant other household
features. The rise in sex ratio imbalance can potentially account for half of the actual
increase in household savings in the recent decade.

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