The Nexus of Chinese Gender and Economic Imbalances

So two economists are rollicking through the National Zoo, checking out pandas, cheetahs, and orangutans, and voila, epiphany strikes! Must come up with novel hypothesis that synthesizes evolutionary biology and sex-ratio differences that lead to the savings-consumption imbalance in China! I mean, who wouldn't want to read that paper, right? If I were an economist, I would've parked myself on the benches outside of the Mane Restaurant at Lion/Tiger Hill and started running regressions on my MacBook Air pronto (National Zoo and Apple: I expect free stuff for this plug). 

I don't want to over-speculate, but perhaps that was how the two authors of the National Bureau of Economic Research paper*, Shang-Jin Wei of Columbia University and Xiaobo Zhang of the International Food Policy Research Institute in DC, operated:
The initial inspiration for the idea in the paper comes from (our visits to the National Zoo in Washington DC, and) the literature on evolutionary biology. In nature, male sea lions or walruses tend to be physically larger than corresponding females; in fact, this pattern holds for most species. A leading hypothesis is sexual dimorphism, which conjectures that because bigger and stronger males have an advantage in competing for and retaining females, this difference in size gets reinforced over time by natural selection (Weckerly 1998). It is likely that humans had to do the same a long time ago; that is why men, on average, are somewhat taller and larger than women. By now, the (sexual) returns to progressively larger males are much lower, if not negative. Men may discover that possessing a larger house, a bigger savings account, and more general wealth is a more effective mating strategy.

This of course is a much more serious exploration of the gender imbalance issue than the far-fetched and farcical "babe tax" solution that I commented on during my guest blogging week for Jim Fallows. The two economists explain their finding of significant correlation between gender imbalance and its contribution to China's high savings rate. Since Chinese high savings and low consumption rates figure as a key issue in global economic imbalances, the implicit implication, then, is that rebalancing the gender ratio in China may go some way toward rebalancing the global economy. Wei and Zhang argue thusly:

This paper proposes a new explanation for savings and tests it using data from China: a rising sex ratio imbalance, by increasing competition among men for potential wives, can stimulate households with a son to postpone consumption in favor of wealth accumulation....Across Chinese provinces, there is a strong positive association between the local sex ratios for the marriage-age cohort and the local household savings rate. The association is stronger for rural areas than for urban areas. The point estimates suggest that approximately 68% of the increase in rural savings rates, and 18% of the increase in urban savings rates in the recent years can be attributed in the rise in sex ratios... 
Moreover:

Accumulating more wealth is not the only way for men to compete in the marriage market. Parents may also invest more in the human capital of their sons, and may also engage in more entrepreneurship, and other higher risk, higher returns activities.
And here's a visualization, where the correlation between savings rate and sex ratio imbalance seems quite clear:

Ma_Nexus_chart.jpg

The authors emphasize that this is simply a hypothesis with preliminary data. It is meant to offer an unconventional view to the Chinese savings conundrum that deviates from the rather dominant "precautionary savings" argument. That is, the dismantling of the socialist system in China has increased households' propensity to save for perceived financial burdens in the future--healthcare, pensions, retirement, and so on. I have little empirical evidence to contribute, except to say that the "highly competitive mating" environment in China seems to mesh with reality, and is particularly pronounced in urban China. I remember back in 2004 Shanghai, some of my Chinese friends quipped that the acronym "BMW" actually stood for "Be My Wife." If Bavarian Motor Works was the "dowry" in the mid-2000s, I can only imagine what it would be these days.  


Much more work needs to be done on this issue. But as a matter of public policy, does this study suggest that a loosening of the one-child policy or changing cultural attitudes toward daughters would materially help China rebalance its economy? No clear answers yet, but it's worth pondering, especially at this pivotal point in China's economic transition. 

*Wei and Zhang actually published the sex ratios and savings imbalance study in 2009, which they recently followed up with a look into the correlation between oversupply of men and likelihood to engage in higher risk entrepreneurial activities. 
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Damien Ma is a fellow at the Paulson Institute, where he focuses on investment and policy programs, and on the Institute's research and think-tank activities. Previously, he was a lead China analyst at Eurasia Group, a political risk research and advisory firm.

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