The Price of Growth: Consumption Insurance in China 1989-2009

53 Pages Posted: 19 Oct 2014 Last revised: 11 Aug 2016

See all articles by Raül Santaeulàlia-Llopis

Raül Santaeulàlia-Llopis

UAB and Barcelona GSE

Yu Zheng

Queen Mary University of London

Date Written: August 9, 2016


The welfare gains of economic growth hinge on the ability of households to insure consumption against the risks associated with growth. We exploit a novel and unique opportunity to study this question using China, an economy that has witnessed enormous and sustained growth and for which we build a long panel of household-level consumption and income. We find that consumption insurance deteriorates along the growth process with a transmission of permanent income shocks to consumption that triples from 1989 to 2009. Investment in children and housing, the predominant options to store wealth in China during these two decades, limit the use of household savings for precautionary reasons. The loss of consumption insurance has implications for the welfare assessment of economic growth across time and across space.

Keywords: Economic Growth, Consumption Insurance, Welfare, China

JEL Classification: D12, O11, O12

Suggested Citation

Santaeulalia-Llopis, Raul and Zheng, Yu, The Price of Growth: Consumption Insurance in China 1989-2009 (August 9, 2016). Available at SSRN: or

Raul Santaeulalia-Llopis (Contact Author)

UAB and Barcelona GSE ( email )

Plaza Civica, s/n
Bellaterra, Barcelona 08193


Yu Zheng

Queen Mary University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

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