China Household Finance Survey

20 May 2014

Today was our first lecture day at Southwest University of Finance and Economics (SWUFE) in Chengdu. We had two lectures this morning. In the first, we talked about the Chinese economy. I wish we had had more time; the lecture could have easily been two hours longer, since China’s economy has such a complex history. After the lecture, Cheryl, a Bush School graduate now working at SWUFE, introduced the China Household Finance Survey, a representative survey designed to determine financial details of Chinese households, such as how much they are saving for their child’s future, how much insurance they have, etc.

The general findings of the survey were very interesting to me, especially since I just had completed Dr. Mu’s Advanced Economic Development class a few weeks ago.

The survey found that the households who were among the poorest shared three characteristics:  self-reported poor health from the head of household, a low level of education, and no insurance.

The “self-reported poor health” characteristic was interesting because in class we read articles about several development interventions in which self-reported health was used as a dependent variable. Findings showed that individuals who had better early childhood nutrition self-reported better health than those who did not have adequate nutrition in the earliest stage of life. Additionally, they reported higher hourly wages, up to 40% higher in some cases! The link between poor health and wages is strongest in physically demanding, low skilled jobs, which are common among the poorest.

Additionally, while writing the research paper for this class, I found articles that claimed that unmarried males in China self-report lower levels of health and lower wages. This has implications for China, since it is predicted that due to the distorted sex ratio at birth, anywhere from 30 to 50 million males (depending on the scholar) will be unable to find a spouse in the next twenty years.

The survey also reported the average wage of heads of household after having completed a certain level of education. These results were as follows:

Primary School: 22,271 RMB

Middle School: 38,692 RMB
High School: 60,927 RMB

When we studied education among the world’s poorest in Advanced Economic Development, we talked about the perception of an S-shaped curve in returns to education. An S-shaped curve would imply that returns are higher at higher levels of schooling and that it is better to send one child to high school than to send two children to primary school or middle school. Though the S-shaped curve does not exist, it is perceived, and many households in developing countries will focus all of their energy on the education of one child, hoping they will reach the highest levels.

The results of the finance survey support all of the evidence disproving the existence of an S-shaped curve and demonstrate steady and even returns on education at each level of schooling.

- Andrea