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China's household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped during the 2000s. The authors find that rising income uncertainty and pension reforms help explain both of these phenomena. Using a panel of Chinese households covering the period 1989-2006, they document that strong average income growth has been accompanied by a substantial increase in income uncertainty. Interestingly, the permanent variance of household income remains stable while it is the transitory variance that rises sharply.
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