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Originality Report


As of: February 22, 2015 12:55:33 PM GMT
2,908 words - 34 matches - 12 sources


667 words / 23% - Internet from 10-Aug-2014 12:00AM

56 words / 2% - Internet from 20-Apr-2011 12:00AM

37 words / 1% - Internet from 12-Jan-2014 12:00AM

31 words / 1% - Internet from 05-Nov-2014 12:00AM

24 words / 1% - Internet from 22-Feb-2010 12:00AM

18 words / 1% - Internet from 31-Aug-2014 12:00AM

14 words / < 1% match - Internet from 23-Sep-2014 12:00AM

11 words / < 1% match - Internet from 10-Jan-2013 12:00AM

11 words / < 1% match - Internet from 17-Nov-2009 12:00AM

10 words / < 1% match - CrossCheck

Wang, X.. "Housing prices and the high Chinese saving rate puzzle", China Economic Review, 201206

10 words / < 1% match - CrossCheck

Chen, C.L.. "Saving and housing of Taiwanese households: New evidence from quantile regression analyses", Journal of
Housing Economics, 200706

8 words / < 1% match - Internet from 16-Dec-2009 12:00AM

paper text:

Literatures Review 1.1 Empirical Evidence on House Prices and Savings in Other Countries Empirical evidence from other countries
suggests that an increase in housing equity (i.e., an increase in house prices) results in a decline in household savings (e.g.,
Case et al., 2005; Muellbauer and Murphy, 1990; Peek, 1983).

In other words, an increase in housing equity through higher house prices encourages more consumption and discourages savings.
Campbell and Cocco (2007) examine the impact of changes in house prices on household savings in the UK over the period 1988-2000.
Their evidence,
which is consistent with the life-cycle hypothesis
show that house prices have heterogeneous effects across old and young households. Older homeowners are observed to have the largest
marginal propensity to consume (MPC) of approximately 0.11 while younger renters are found to have the smallest and insignificant MPC.
Lehnert (2004) provides evidence consistent with the collateral and life-cycle hypothesis. The study estimates the MPC out of household
wealth changes for different quintiles based on US household-level data over the period
1968-1993 waves of the Panel Study of Income Dynamics (PSID).
The study provides evidence that the highest MPC ranges from 0.025 and 0.039 and is attributable to households in the 25-34 age groups.
Households in the age group 52-62 were found to exhibit an MPC in the range 0.020 to 0.035. This evidence shows that the young and late
middle aged tend to be more affected by changes in house prices while the middle aged and elderly appear to be least sensitive to
changes in house prices. In particular, the young and middle aged significantly reduced their saving in response to increases in house
prices while middle aged and elderly did not significantly adjust their saving behaviour in response to changes in house prices. According
to the collateral hypothesis, houses can be used as collateral for borrowing. This means that an increase in house price can enable one to
take out a second mortgage. Mian et al. (2013) provide evidence in support of the collateral hypothesis by taking the case study of the
house price bubble in the US over the period 2006-2009. The study provides evidence that the house price bubble negatively affected
spending during the recession through tighter credit constraints. This indicates that the decline in house prices during the housing bubble
actually resulted in lower spending and higher savings. Other studies in support of the collateral hypothesis provide evidence that younger
households have a higher propensity to consume out of housing wealth than older households. This shows that younger households tend
to save less following increases in house prices than older households (Browning et al., 2013). The study employs Danish administrative
data over the period 1987-1996 to investigate the effects of a shift in 1992 from a regime in which households could not make use of
housing equity as collateral to a regime, it could be used to provide evidence that an increase in house prices results in lower savings and
vice versa. Empirical evidence also suggests the presence of asymmetric responses in savings to increases and declines in house prices.
The empirical evidence shows that households do not respond to increases in house prices, but do respond to declines in house prices. A
possible reason behind this asymmetric response is the fact that households tend to anticipate capital gains but do not anticipate capital
losses. Skinner (1996) investigates the MPC from increases and declines in house prices for younger home owners using date from the
1989 wave of the PSID. Based on quantile regressions, the study observes an MPC of 0.1 for decline in house prices, but does not observe
any significant impact of increases in house prices on the MPC. Engelhardt (1996) employs data for the 1984-1989 waves of the PSID to
examine the asymmetry in the response of savings to changes in house prices. Based on quantile regressions, the study provides
evidence that households that experienced real capital losses responded more than those than experienced real capital gains. The
marginal propensity to save in response to falls in house prices is found to be approximately 0.35. 1.2 Empirical Evidence on House Prices
and Savings in China The literatures
on savings in China


grown rapidly in recent years;



them are

prompted by Chinas unusually high

savings rates.
National accounts flow of funds data yield aggregate savings rates in the range of 20 to 25
to 30

per cent

in the late 1990s and early 2000s and then increasing further to nearly 40

Households have contributed from 40

per cent

to 50

per cent

per cent
per cent

in the early 1990s, rising

by 2008 (Ma and Yi 2010).

or more of aggregate savings, and studies based on national

accounts data report shares of household savings in GDP generally in the range of 17 to 23

per cent

(Ma and Yi 2010; Chamon

and Prasad 2010, Yang, Zhang and Zhou 2011). Household survey data yield lower average savings rates, but with similar upward
trends. For urban households, the focus of this paper, average savings rates calculated using household survey data from the
National Bureau of Statistics (NBS) rose from 15-18

per cent

per cent

in the 1990s to 20

per cent

in the early 2000s, and further to over

in the late 2000s (Chamon and Prasad 2010; Yang, Zhang and Zhou 2011).

Wei and Zhang (2009) propose that the unbalanced sex ratio in China leads to competitive saving


in the marriage

markets, which may significantly raise the aggregate household saving rate because men with adequate wealth accumulation
such as



to buy houses are more likely to attract marriage partners. Such


further drives up

prices and reinforces this competitive saving

Explanations for Chinas high household saving rates generally take the lifecycle hypothesis (LCH) as a starting point. Several
studies explicitly test the applicability of the LCH to China, in some cases making comparisons with Keynesian models (Ang 2009,
Horioka and Wan 2007, Modigliani and Cao 2004). The LCH implies that household saving rates may be affected by (anticipated)

growth in per


income, age or stage in the lifecycle, interest rates, and inflation. Uncertainty about future income growth

can create a motive for precautionary savings, and so

is correlated with the saving rate (Kraay 2000; Nabar 2011). Kraay (2000) observes that for rural households, higher future income growth
results in lower current saving rates because households raise their consumption when anticipating of higher expected future income.
Kraay (2000) also observes that higher future income uncertainty appears to result in higher current saving rates. Nabar (2011) provide
evidence household savings in China thats savings related to the real interest rate. The study also finds that there are differences in the
results across sub-periods. The results indicate that households in China save with the objective of meeting different needs in future, such
as purchase of durables, retirement consumption and self-insurance to against income volatility and health shocks. A bulk of literatures
(Wang and Wen, 2011; Bernanke, 2005; Wei and Zhang, 2009) on the housing wealth effect in China focus on
urban sector since the mid- or late 1990s, the period during which Chinas urban housing


was completed and

real estate markets became more developed.

These findings suggest that in consistent with the empirical evidence found elsewhere in the world,
Chinas urban savings rates should be declining (because housing prices have been increasing).
In particular,
Jin (2011) uses household data from Beijing to

This finding




the housing wealth effect on consumption and finds a weak


micro level data that is supposed to be more plausible, compared to macro level data. A small household-level survey of 254 observations
from 69 households over the period 2006-2010, is used in the paper.
Chen, Funke and Mehrota (2011) examine the housing wealth effect using a larger, city-level dataset.
The paper makes use of a regression model to show that the volatility
and persistence of house price movements have different

effects on

the consumption/housing ratio. The

study also exploits

the geographical variation in property prices by using a quarterly city-level panel dataset


the period 1998Q1-

The results show that property prices have a significant long run effect on consumption. The paper reports
a positive and significant effect of housing prices on consumption,

put differently,

housing price appreciation reduces

savings . The effect is stronger in cities where house prices have risen more quickly and have been more volatile.
However, the
puzzle of Chinas high and rising savings rates
remained unexplained in the paper. To solve this puzzle, the presence of credit constraints could be considered. MatthieuBussi and etc.
(2013) finds that
householdsability to borrow to finance housing purchases is limited,

especially when


are going

to purchase

second home due to the underdeveloped credit market in China. 1.3 Motivation of this Study This study is motivated by the increasing
trend of second home purchase in China. With the development of society and economy, second home purchase plays an increasingly
important role in modern society with the extending of scale. In recent years, it has attracted a great deal of attention in academia as a
prominent phenomenon. However, most existing literature on second home purchase mainly concentrates in Europe and the United
States, and little has been done regarding developing countries. China Household Finance Survey (CHFS), which involved a huge number
of households through 25 provinces has documented the stylized facts of second home purchase in China. That is, the scale of second
home purchase appears an evident enlarged trend, and 15.9% urban households are holding more than one property in 2011, 18.6% in
2013 and increase to 21.0% rapidly by March 2014. In general, the number of property per household is 1.02. Moreover, China has more
second property owners than most developed countries. This study is aimed to investigate the relationship between second home
purchase and householdssaving behaviour. Furthermore, the State Council of China issued tight rules to limit second housing loan, which
include the raising of down payments on the purchase of second homes.
On loans to buy



the ratio of

down payment shall be


less than

30%. However, for second-home buyers, the minimum down payments are required to be at least 50%, and mortgage
interest rate shall be


less than 1.1 times of the benchmark interest rate

(China State Council, Oct 2010). Hence, we also analyse further how the presence of tighter credit constraint on second home purchase
would influence the effect of second home purchase on householdssaving behaviour. The tighter credit constraint motivate households
have to save more for second house purchase. On the other hand, the amount of households saving behavior also depends on the house
then households that wish to purchase a



prices increase



other assets,


that generates higher future wealth level. We aim to fill the gap in the literature by analysing
the impact of credit constraints and housing purchases on household savings


in China,

especially where second home loan policy is involved. To our best knowledge, the study of saving behaviour on second home purchase in
China had received no attention in the existing literature. Furthermore, allows the
access to new household-level datasets, such as the

household mortgage

survey data, a

plausible and innovative empirical analysis. This study will therefore contribute to the literature by looking at the relationship between house
prices and household savings in China with particular emphasis on the purchase of a second home by using a new dataset. In particular,
the paper will examine whether in the presence of credit constraints, the need to purchase a second home can help in explaining the high
saving rate in China. 1. Data description In this lifecycle model,
all data from Chinas household survey are taken from the China Statistics Yearbook,



on nominal mortgages


taken from
a station-owned commercial bank in China. The loan limitations to households are measured by the number of house they had, so we can
bring the model to the dataset with the specific home loan data. As an epitome of state owned bank in China, it could provide very
representative and sufficient national wide samples, which is available for all 31 provinces, and
contain detailed information about household income,




as well as other relevant individual and

household variables,
which can be used to calculate household savings. 2. Research method We deviate from existing literature by introducing various
borrowing constraints. Our hypothesis
that the relationship between housing prices and saving



depends on


borrowing constraints. We take an investigation on whether in the presence of borrowing constraints;

higher house prices will be associated with higher saving rates,



case in second home purchase. To investigate

the role of rising housing prices and borrowing constraints as


of high saving rate

in second home purchasing activities, we start with some assumptions and build a regression model for estimations as follow: Saving rate
= Constant + 1House price + 2Net value of first house +3 Characteristics of households (location, age, income level, family size) +
5Macroeconomic indicators Assume that real assets got a higher return rate than deposits, which describes the feature of China
economy appropriately.
Households can be willing to increase their saving rate
to accumulate enough wealth under such an assumption to purchase second home. Accordingly, saving rates of second-home buyers
are shown to be an increasing function of housing price.
Definitions of variables are similar to
the ones in




(2007). Dependent variable is


saving rate

of household in


model. Saving rate is the rate

of household savings to household disposable income (net household income in case of rural households)
savings are calculated as household disposable income minus household consumption.



Data of yearly housing price index for all provinces in China during 2000 to 2012 is from China Statistical Yearbook. The net value of
first house can be translated into a part of household asset. It is an important factor affecting households future fixed assets investment
and saving rate. Information of household characteristics have been contained into the dataset from bank, we could then observe the
characteristics by subdivided them into location, age, income level and family size. Locations of household can generally fall into three
groups, first-tier cities, second-tier cities and other cities. That is because peoples saving behavior will be affected by local economics
progress. Income level is measured by households per capita disposable income, which includes labor income, property income, and
income generated by household sideline production. Family size is also a further factor to be considered to keep per income calculation
from uneven distribution. We consider the age of family member who get the highest income. Furthermore, growth rate of GDP functions a
measure of macroeconomics index. Swift growth of
nominal GDP means that asset prices do not need to fall so far to regain fair value, bad loans are easier to work off,
which in a sign that banks may be more willing to lend and more amount of loans. However, because of the different growth rates and
house prices, its difficult to find a uniform standard of down payment for cities in all level. For most cities in China, down payment be
defined as 30%. For second home purchase, a 50% down payment is required for households in most cities, but does not hold for cities
with extremely high housing demand. Households in first-tier cities have to make a much higher down payment for second mortgage, such
as 70% in Beijing, 60% in both Shanghai and Guangzhou. Therefore, we can consider samples into city groups due to different standards
of down payment. Samples may be roughly grouped under two headings: first-tier cities and the other cities. By observe change of to all
groups based on basic model after group cities, we could then take a further study to investigate how the relationship between housing
price and saving behaviour be influenced by various down payment in different extent. 3. Conclusion This paper aims to revisit the
puzzle of the high savings rates of Chinese households, focusing on the role of housing prices and borrowing constraints.
Insights from a theoretical model



second loan



houses), higher house prices will be associated with higher saving rates when the return on financial instruments is low


compared to that on real estate. We

suggest that for financially constrained households (i.e. for households that face
and need to make substantial

can also

rates, based on detailed micro data from the

down payments

for the purchase of their

present key stylized facts and empirical results on Chinese household savings
second housing loan

database. Regression results lend substantial support to the

The results

can be

subjected to a battery of robustness tests

to confirm

the main findings.




shed a

new light on household savings in China

to fill the gap of researches of saving behaviors. The
analysis, however, makes clear that the housing sector is not the cause of elevated saving rates. Rather, high saving rates result
from the combined effect of high
yield reasonable returns.


prices, borrowing constraints, and the absence of alternative savings instruments that