The Impact of Peer Effect on Household Savings: Evidence from China

Keting Qi; Li Xu

doi:10.54097/y8zpqp44

Authors

Keting Qi
Li Xu

DOI:

https://doi.org/10.54097/y8zpqp44

Keywords:

Household savings, Peer effect, Difference aversion, Social trust, Economic growth

Abstract

Understanding the factors that influence household savings behavior is essential for promoting economic sustainability and enhancing financial stability, especially in transitional economies like China. We propose a two-way fixed effects model to investigate the relationship between peer savings and individual household savings within the same community using the China Labor-force Dynamics Survey (CLDS) data, covering the period from 2012 to 2018. We further propose two moderate factors, social security and social capital, to explore the effect on household savings. The results indicate that peer savings within the same community significantly raise individual household savings, as a 1% increase in peer savings is associated with a 59.8% increase in household savings. Further, we evaluate that the peer effect in rural areas is 4.7% higher than in urban areas, 13% higher in wheat- than in rice-growing regions and 4.6% higher in small than in big community. Overall, these findings highlight the importance of social interactions and contextual heterogeneity in shaping household savings, offering policy insights to strengthen financial resilience and support sustainable development.

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