One-Child Policy, Pension Reform, and Household Saving Rates in China
Abstract
This paper examines the impact of the One-child policy and pension reforms on household savings in China using an overlapping generations model. The model incorporates intergenerational transfer, endogenous fertility, human capital investment, and pension system by extending the framework in Choukhmane et al. (2013). Using the parameters calibrated with microdata in Choukhmane et al. (2013), I find that the one-child policy increases individual household saving rates across all age groups and it leads to a relatively flat age-saving profile. One-child policy also increases investment in the human capital of children. The model predicts that an increase in pension benefits discourages household savings and decreases investment in the human capital of children. However, responses vary across households with different initial wealth.