The Effects Of Education Level On Household Saving Rate

The average educational level and household saving rate have both witnessed an upward trend during the last two decades in China.On one side,low consumption rate and high saving rate have become one of the factors which have restricted the development of Chinese economy.On the other side,average education attainment in China has also improved significantly with extremely low illiteracy rate,higher penetration of nine-year compulsory education and higher enrollment rate of higher education.This thesis utilizes data from China Family Panel Studies conducted in 2010 and 2012 to examine the relationship between educational level of household heads and household saving rate.The result shows that educational level has a negative effect on household saving rate.In order to analysis the mechanism of the effect of education level on household saving rate and explain the result of basic regression,this thesis provides a further analysis on the mechanism of income uncertainty and personality traits.Firstly,in consideration of the importance of the precautionary saving motivation in Chinese residents' saving behavior and the relationship between education and income uncertainty,we have analyzed the mechanism of income uncertainty.The result indicates that educational level has a negative effect on saving rate through the mechanism of income uncertainty which could explain 41.67% of the result in the basic regression.Thus,families with higher educational level have a lower saving rate partly because they have lower income uncertainty which makes their precautionary motivation for saving weaker.Secondly,given the importance of the personality traits in Chinese residents' saving behavior and the relationship between education and personality traits,we have analyzed the mechanism of personality traits.The result indicates that educational level has a negative effect on saving rate through the mechanism of Orderliness and Extroversion which can account for 16.67% and 8.33% of the total effect.Thus,families with higher educational level have a lower saving rate partly because they prefer to allocate their money on other kinds of investment or consumption instead of saving.In addition,the interactions between education and personality traits have also adjusted the education's effect on saving rate.