Household savings and subjective wellbeing: Evidence from China

• Published date: 01 December 2021
• Author: Fuzhong Chen,Guohai Jiang,Mengyi Gu
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/joca.12405

SPECIAL ISSUE

Household savings and subjective wellbeing:

Evidence from China

Fuzhong Chen | Guohai Jiang | Mengyi Gu

School of International Trade and

Economics, University of International

Business and Economics, Beijing, China

Correspondence

Fuzhong Chen, School of International

Trade and Economics, University of

International Business and Economics,

Beijing 100029, China.

Email: uibesitechen@126.com

Funding information

Huiyuan Excellent Young Scholars of

University of International Business and

Economics, Grant/Award Number:

18YQ07; Social Science Foundation of

Ministry of Education of China, Grant/

Award Number: 16YJC790006

Abstract

The purpose of this paper is to investigate the association

between household savings and subjective wellbeing

(SWB) using data from the China Household Finance

Survey conducted in 2011, 2013, 2015, and 2017. The

results indicate that the association between household

savings and SWB is nonlinear, showing an inverted

U-shape, which implies that there may be an optimal

amount of household savings to maximize SWB. Further-

more, this study explores the heterogeneity of different

groups and finds that the optimal amounts of household

savings vary among subsamples in terms of region,

income, age, and risk attitude. These findings have impli-

cations for consumer educators and policymakers when

they help consumers to make rational saving decisions.

KEYWORDS

household savings, nonlinear association, ordered logit

regression, subjective wellbeing

1|INTRODUCTION

With the development of consumer finance, issues surrounding subjective wellbeing (SWB) are

increasingly prevalent and are of keen interest to researchers, policymakers, and practitioners

(Manolis & Roberts, 2012; Pancer & Handelman, 2012). SWB is a broad concept that includes

individuals' emotional situations, domain satisfactions, and global evaluation of life satisfaction

(Diener et al., 1999; Xiao, 2015). Research on SWB may carry significant meaning, not only for

policymakers in identifying situations related to consumers but for consumers themselves in

enhancing their SWB (Sirgy & Lee, 2006). It is a broad field that has been investigated from

Received: 28 October 2019 Revised: 7 August 2021 Accepted: 16 August 2021

DOI: 10.1111/joca.12405

© 2021 American Council on Consumer Interests.

J Consum Aff. 2021;55:1489–1504. wileyonlinelibrary.com/journal/joca 1489

many different perspectives, which substantially reflects in a wide variety of ways to address

SWB (Iyer & Muncy, 2015).

As a means of moving funds from now to the future, household savings play a vital role in

consumers' daily lives (Tufano, 2009), especially in the context of uncertainty (Chamon

et al., 2013). For consumers, household savings can be considered as not only a direct source of

SWB but also as a resource for engaging in meaningful consumption activities in the future.

China has had the highest savings rate in the world for a long time (Kraay, 2000); further, such

a high savings rate has already hindered China's economic development and became a reason

for the lack of domestic consumption motivation (Chu & Wen, 2017). Moreover, Martin and

Hill (2015) suggested that SWB is directly and significantly associated with household savings.

Previous studies have suggested that household savings have greatly improved SWB in high-

poverty societies (Martin & Hill, 2015); however, the question of what is the relationship

between household savings and SWB in a country with a high household savings rate like

China remains unanswered. Although previous studies failed to provide answers, this topic is

important for both theories and practices. Therefore, this study focuses on the potential rela-

tionship between household savings and SWB and puts forward corresponding implications for

policymakers.

The purpose of this study is to examine the association between household savings and

SWB using data from the China Household Finance Survey (CHFS) conducted by the South-

western University of Finance and Economics. Furthermore, this study also investigates the

heterogeneity among subgroups in terms of region, income, age, and risk attitude. This study is

informative for policymakers and researchers in the development of effective consumer policies

and education programs and is conducive to consumers' continuously improving SWB as well.

Furthermore, this study is also pivotal in understanding the excessively high current household

savings rate in China and its inhibitory effect of the high household savings rate on China's

economy.

Unlike previous research, this study contributes to the extant literature in four ways. First,

although previous studies have revealed connections between household savings and SWB, they

have not yet reached a consensus. Some studies claim that household savings will improve

SWB, while others find the opposite. Meanwhile, this study develops a nonlinear framework,

introducing the quadratic term of household savings, and focuses on the nonlinear association

between household savings and SWB with an inverted U-shape. Second, unlike previous studies

that focus on high-poverty societies, this study uses China as a case, since China's high house-

hold savings rate not only affects China's economic growth but also the world economy. Third,

this study further explores the heterogeneity of different groups that have practical values for

policymakers. Specifically, this study uses a subjective factor (risk attitude) and objective factors

such as region, income, and age for heterogeneous analyses. Finally, this study includes samples

from four-wave surveys to avoid potential sample selection bias due to cross-sectional data.

2|LITERATURE REVIEW

2.1 |Measurements of SWB

SWB is a scientific term that describes how consumers evaluate their lives. The most efficient

way to measure SWB is to ask respondents to articulate their evaluation of life satisfaction.

Among all of its surveys, CHFS measured SWB (Chen et al., 2020), which has been used by

1490 CHEN ET AL.