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Political Uncertainty and Household Savings

Authors: Aaberge, Rolf; Liu, Kai; Zhu, Yu;

Political Uncertainty and Household Savings

Abstract

Despite macroeconomic evidence pointing to a negative aggregate consumption response due to political uncertainty, few papers have used microeconomic panel data to analyze how households adjust their consumption after an uncertainty shock. We study household savings and expenditure adjustment from an unexpected, large-scale and rapidly evolving political shock that occurred largely in May 1989 in Beijing, China. Using monthly micro panel data, we present evidence that a surge in political uncertainty resulted in significant temporary increases in savings among urban households in China. Households responded mainly by reducing semi-durable expenditure and frequency of major durable adjustment. The uncertainty effect is more pronounced among older, wealthier, and more socially advantaged households. We interpret our findings using existing models of precautionary behavior. By focusing on time variation in uncertainty, our identification strategy avoids many of the potential problems in empirical studies of precautionary savings such as self-selection and life-cycle effects.

Countries
United Kingdom, United Kingdom, Norway
Keywords

JEL classification: J3, China, 330, 38 Economics, VDP::Matematikk og Naturvitenskap: 400::Matematikk: 410::Statistikk: 412, Household savings, household savings, 3801 Applied Economics, China; household savings; uncertainty, D91, uncertainty, China; household savings; political uncertainty., political uncertainty, Political uncertainty, JEL classification: E21, ddc:330, Econometrics and Finance(all), 3802 Econometrics, China, household savings, political uncertainty, /dk/atira/pure/subjectarea/asjc/2000, name=Economics, J3, JEL classification: D91, E21, jel: jel:E21, jel: jel:D91, jel: jel:J30, jel: jel:J3

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
65
Top 1%
Top 10%
Average
Green
hybrid