Monday, February 15, 2010

What is responsible for the crisis? Lack of sex!

Shang-Jin Wei explains in his text on "The Mystery of Chinese savings" on that high rate of Chinese savings, which led to global imbalances and too low interest rates in the US before the crisis were due to the surplus of Chinese men over women (122 to 100) which has produced a highly competitive marriage market. One in five Chinese men is unlikely to find himself a wife. To increase chances of finding a suitable bride (or any bride for that matter) and yes, have sex with them, Chinese men (and their parents) save like crazy (there is an implicit assumption here that women seem to like men with money more than average, which I think is a credible assumption). Are there any policy recommendations to lower the savings rate? I have some ideas, but will leave it to the readers for now to ponder.

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