Can the expansion of a prosperous middle class help China to rebalance to consumption-led growth? We address this question through analysis of macro- and micro-level data. Using macro statistics, we examine trends in national aggregate consumption and GDP growth from 2000 through 2019. We observe growth in aggregate consumption but do not find convincing evidence of consumption-led growth. Using micro-level household survey data from 2002, 2007, 2013 and 2018, we estimate the size of China's prosperous middle class and its contribution to aggregate consumption growth. We find that the prosperous middle class expanded rapidly but contributed less to aggregate consumption growth than expected. We discuss features of this class that diminished its contribution to consumption-led growth, including its low propensity to consume out of income and its limited expansion beyond urban subgroups. We conclude that the expansion of the prosperous middle class is necessary but not sufficient to bring about rebalancing.

State and local pension plans are increasingly moving from the traditional defined benefit (DB) model to non-DB models that generally allow for participant-directed investment. This shift has important implications for the management of the more than US$3 trillion in assets held to finance public employee retirement benefits. To investigate these implications, we introduce new data from a nationwide survey of public DB and non-DB plans and a unique data set on thousands of individual investors in the state of Florida's defined contribution (DC) plan. Using these sources, we explore how participant involvement in the public sector affects the distribution of asset class allocations, management fees, investment outcomes, and portfolio rebalancing at both the individual and aggregate levels. We found that there is little difference between the DB and non-DB plans in terms of asset mix, returns, and fees, except that DB plan have greater access and allocations to alternative investments. We also found that while the average individual DC plan participant allocated their asset similarly to the DB plan, black females and older white males, on average, invested on opposite tails of the risk spectrum.

An analysis is made of the effect on portfolio performance if assets are continually rebalanced to constant market value proportions, relative to the passive ‘buy and hold’ strategy. The probability that one strategy outperforms the other is evaluated on the basis of a geometric diffusion model of market prices and by reference to historical data.