There are, by last official count, 122 boys being born for every 100 girls in China, on the average, while in some areas it is as high as 145 to 100.  Over the years there have been countless riffs on how politically, socially, and economically, this unnatural ratio has and will continue to  shape China.  Professor Shang-Jin Wei, the N.T. Wang Professor of Chinese Business and Economy in the Finance and Economics Division and director of the Jerome A. Chazen Institute of International Business at Columbia Business School, is the first to theorize on the connection between the ratio and Chinese savings patterns.  (The paper can be found, here)

As Mr. Wei’s post at the Columbia Business School (CBS) suggests, his theory is driven by market theories.  The following is an excerpt from an interview he gave to CBS Ideas at Work;

“The increased pressure on the marriage market in China might induce men and parents with sons to do things to make themselves more competitive,” Wei says. “Increasing savings is one logical way to do that, to the extent that wealth helps to increase a man’s competitive edge. Parents increase household savings mostly by cutting down their own consumption.”

Wei worked with Xiaobo Zhang of the International Food Policy Research Institute in Washington, D.C., to see if his hypothesis held up, comparing savings data across regions and in households with sons versus those with daughters. “We find not only that households with sons save more than households with daughters in all regions,” Wei says, “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.”

The effect is significant. The household savings rate in China rose from about 16 percent of disposable income in 1990 to over 30 percent today, which is much higher than most countries. About half of the increase in the savings rate of the last 25 years can be attributed to the rise in the sex ratio imbalance. “It’s a very high ratio of savings to income,” Wei says. “The comparable savings rate in the United States would be 2 or 3 percent before the crisis, and about 6 percent since the crisis.”

Even those not competing in the marriage market must compete to buy housing and make other significant purchases, pushing up the savings rate for all households.

It is truly ironic that his theory neatly summarizes the impact of the most well known communist policy in the world, One Child, by using capitalism’s most iconic instrument, the market.