Wealthy Hand-to-Mouth Households in China

The wealthy hand-to-mouth are households who are poor in liquid wealth (e.g. cash and checking accounts) and rich in illiquid wealth (e.g. housing and retirement accounts), while the poor hand-to-mouth are poor in both liquid and illiquid wealth. Data from the China Household Finance Survey reveal the following facts about the country’s wealthy hand-to-mouth. First, they represent the majority of the hand-to-mouth households in China. Second, they have different wealth portfolios and demographic features from the poor hand-to-mouth. Finally, they have larger consumption responses to income fluctuations than non-hand-to-mouth households, after controlling for endogeneity, income, hand-to-mouth status and other household characteristics.