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Breaking the “Iron Rice Bowl” and Precautionary Swings: Evidence from Chinese State-Owned Enterprises Reform
We use China?s large-scale reform of state-owned enterprises (SOE) in the late 1990s as a natural experiment to identify and quantify the importance of precautionary savings for wealth accumulation. Before the reform, SOE workers enjoyed the same job security as government employees. After the reform, a cumulative of over 35 million SOE workers have been laid off, although government employees kept their ?iron rice bowl.? The change in unemployment risks for SOE workers relative to that of government employees before and after the reform provides a clean identification of income uncertainty ...