There are times when you feel close to the central conversations and conversationalists shaping our world during the Columbia MBA.

Shang-Jin Wei introduced us to the theory he is putting forward to explain the global savings glut that has shaped so much of our modern times during our first class in Shanghai on the Global Immersion Program. The common narratives incorporate China’s weak safety net, post-Asian financial crisis conservatism, oil booms, Confucius culture and more. Professor Wei claims that the most influential driver of increased savings has actually been the wildly divergent male to female ratios that many parts of the world have been experiencing over the past couple of decades. With perfect timing, this week’s Economist, coinciding with International Women’s Day, quotes professor Wei’s research in its fascinating Gendercide cover report.

(The Gendercide + Economist image search is censored here in China so this is the best jpg i can use!)

Some of the consequences of the skewed sex ratio have been unexpected. It has probably increased China’s savings rate. This is because parents with a single son save to increase his chances of attracting a wife in China’s ultra-competitive marriage market. Shang-Jin Wei of Columbia University and Xiaobo Zhang of the International Food Policy Research Institute in Washington, DC, compared savings rates for households with sons versus those with daughters. “We find not only that households with sons save more than households with daughters in all regions,” says Mr Wei, “but that households with sons tend to raise their savings rate if they also happen to live in a region with a more skewed sex ratio.” They calculate that about half the increase in China’s savings in the past 25 years can be attributed to the rise in the sex ratio. If true, this would suggest that economic-policy changes to boost consumption will be less effective than the government hopes.

Professor’s Wei’s thesis is that the increasing male to female ratios (which according the Economist is due to cheap prevalent ultrasound technology, shrinking families and gender bias) have encouraged higher saving levels as sons’ parents must vie for the limited pool of potential brides. Professor Wei in a recent Forbes op-ed had this to say:

The resulting pressure on the marriage market in China might induce men and parents with sons to do things to make themselves more competitive. Increasing savings, mostly by cutting down on the family’s spending, is one logical way to do that. Wealth helps to increase a man’s competitive edge in the marriage market. Ironically, increased savings does not change the total number of men who get married in the aggregate. In this sense, the increased savings is socially inefficient. However, from an individual household’s viewpoint, when the competition for a marriage partner is tough, it cannot afford to save less than its competitors. I call this effect “keeping up with the Zhangs.”

Professor Wei goes further still, claiming that the ratios can also help explain regional differences in entrepreneurship and appetites for hardship. We have heard him present his research findings to a few different audiences here in Shanghai and it looks like he has some work to do in changing general consensus. It seems to make a lot of sense to me, the only question is how big of a factor is the sex imbalance relative to the competing explanations.

Related articles by Zemanta

• Why do the Chinese save so much? (marginalrevolution.com)
• China’s shortage of women driving thrift, report says (nationalpost.com)
• International Women’s Day Marked Around the World (videocafe.crooksandliars.com)