We exploit a novel and unique opportunity to document the transmission of income risk to consumption in a growing economy. Our laboratory is China, an economy that has witnessed enormous and sustained growth. We build a long panel of household-level consumption and income data. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that at least triples from 1989 to 2009. Although preliminary, our welfare analysis suggests that the loss of consumption insurance can have first-order implications for the welfare assessment of economic growth.
Santaeulàlia-Llopis, Raül, and Yu Zheng.
"The Price of Growth: Consumption Insurance in China 1989–2009."
American Economic Journal: Macroeconomics,
Consumer Economics: Empirical Analysis
Macroeconomics: Consumption; Saving; Wealth
Microeconomic Analyses of Economic Development
Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
Socialist Systems and Transitional Economies: National Income, Product, and Expenditure; Money; Inflation
Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics
Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training: Welfare, Income, Wealth, and Poverty