Three essays on household saving and wealth (China)

This dissertation explores the impact of risk on household saving, portfolio decisions and evolution of non-land wealth with a panel of household data from rural China. It consists of three chapters.; In the first chapter, we develop a test of precautionary behavior in the consumption and saving decisions of rural agricultural households. We first present a constant relative risk aversion model of household consumption decisions in which consumption risk is explicitly related to yield risk. Next we discuss ways of using rainfall variance as a proxy for yield risk, and consider the possibility of using a GARCH model to estimate conditional rainfall variance. Finally, we test the empirical model using household panel data from rural China and find evidence of precautionary motives behind consumption and saving decisions. We estimate that roughly 11--12 percent of household savings can be attributed to a precautionary motive for households facing a median level of consumption risk.; Based on relatively recent panel data (1995--2000) in rural China the second chapter presents the empirical evidence that rainfall variability as a proxy for yield risk influences the portfolio composition of a household. We find support for an allocation toward liquid assets in response to more volatile rainfall variability. We observe that cash and deposits are important instruments for their precautionary wealth allocation, while it is difficult to find the similar evidence for grain stocks. It may imply that financial instruments have played an important role in precautionary portfolio allocation while dramatic institutional changes of the post-reform period have been proceeding in contemporary rural China.; The composition and inequality of wealth in rural China is examined in the third chapter. We first document the evolution of rural households' non-land wealth during the period from 1986 to 2000. Our results show that financial and fixed productive assets have become more important in their weight in wealth composition, while housing assets have played a dominant role during this period. Based on various inequality measures we observe that the inequality of rural non-land wealth has worsened but there was improvement in these asset holdings across the period in rural China.