A SEXUALLY UNBALANCED MODEL OF CURRENT ACCOUNT IMBALANCES

Large savings and current account surpluses by China and other countries are said to be a contributor
to the global current account imbalances and possibly to the recent global financial crisis. This paper
proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists,
transformation in many of these societies, namely, a steady increase in the surplus of men relative
to women. We construct an OLG model with two sexes and a desire to marry. We show conditions
under which an intensified competition in the marriage market can induce men to raise their savings
rate, and produce a rise in the aggregate savings and current account surplus. This effect is economically
significant if the biological desire to have a partner of the opposite sex is strong. A calibration of the
model suggests that this factor could generate economically significant current account responses,
or more than 1/2 of the actual current account imbalances observed in the data.