A Study Of Chinese Household Financial Assets Inequality And Intergenerational Transmission Based On Bewley Model

The sustained development of economy rapidly increases the residents’ per capita disposable income in our country, meanwhile the progress is accompanied with the household financial assets inequality, growing property income gap and low social mobility. Currently, financial assets, one of the main sources of property income, is rising to be a new choice for people to obtain the goal of asset preserving and appreciation after the savings era and the real estate period. So, proper portfolio and balanced distribution is vital to realize assets appreciation and lessen the property income disparity. Then how is the current distribution of financial assets in different families? Does it show great inequality? What is the mechanism behind the inequality if it exists? This paper analyzes intra-generational financial assets inequality from the perspectives of precautionary savings motive and heterogeneity, and meanwhile investigates the formation mechanisms of the inequality from the perspective of intergenerational transmission.Firstly, a basic theoretical framework is established based on Bewley model in this paper. In the infinitely-lived Bewley model, borrowing constraints and heterogeneity help explain the distinct distribution of financial assets. The results are closer to economy reality than that based on traditional assumptions of perfect market and homogeneity. While in the overlapping-generations(OLG) Bewley model, the paper examines the formation mechanisms of household financial assets inequality from the perspectives of monetary capital intergenerational transmission and human capital intergenerational transmission, which extend the static analyses to dynamic analyses.Secondly, the paper analyzes the intra-generational inequality of financial assets based on CFPS dataset. And the results verify the conclusions in the infinitely-lived Bewley model. The statistical results show that riskless deposit is the main household financial assets, which indicates precautionary deposit is the significant motive in Chinese household. Financial assets portfolio is obviously distinct in different families, which means the heterogeneity of economic environment and economic status can explain the intra-intergenerational household financial assets disparity to some extent. Moreover, financial assets distribution shows greater inequality than household income, and it will not be lessened in a short time.Finally, the paper empirically examines the formation mechanisms of household financial assets inequality in OLG Bewley model. The estimation of intergenerational elasticity(IGE) demonstrates a low intergenerational mobility, which means the household financial assets inequality will exist in the long run. The decomposition results indicate that the direct influence of financial capital transmission is much stronger than that of human capital transmission. Moreover, it is not easy for the rural families and low-range families to improve their economic status.