Research On The Efficiency Of China’s Social Endowment Insurance On Urban Resident’s Consumption

In recent years, household saving rate always stands on a high level, whichseverely gets in the way of a healthy and sustainable development of our economy.Expending consumption has become a vital measure for adjusting economic structureand conducting a sustainable development of our economy. The key factor of boostingdemand of consumption lies in the in-depth research of consuming behavior as well assaving motivation. It is widely acknowledged by the scientific community thatendowment is the most primary factor. Endowment insurance system, a basic securitysystem for resident income and later life, closely interacts with a host of issues related tohousehold consumption. However, since Feldstein turned to this field in1974, therehave been hundreds of related papers emerging from scientific community. However,the impact that endowment insurance casts on residents’consumption and capitalaccumulation is still uncertain. Some scholars even take the pay-as-you-go insurancesystem as Ponzi scheme. Judging from China’s situation, GDP shows a forceful growthtrend and endowment system has been perfected. Nevertheless, household saving rate,surprisingly, ascends instead of descending.The paper takes current national condition into consideration and conduct theresearch of how endowment insurance influences household consumption from twoangles in terms of mathematical economics and econometrics. In the theoretical session,we take full account of the feature of current consuming theory as well as themechanism of how endowment system affects residents’ consumption. In the wholetheoretical framework of partial equilibrium and general equilibrium, we separatelyestablished the consumption-depended mathematical model, including consumingdynamic route and consumption function. In the partial equilibrium model, wecomprehensively consider the variable with respect to endowment insurance,demographic characteristics, precautionary saving, internal habit formation and liquidityconstraints. Furthermore, in the general equilibrium model, the externality ofconsumption and human resources effect of endowment insurance are furtherconsidered. The model set up in this paper not only possesses representation, but alsorealize the reasonable fusion of individual-depended model and macroeconomic growthmodel. In order to test the reasonability of the model, we conduct the empirical analysisfrom both the micro and macro perspective, adopting the provincial panel data from1994to2013and the data from CHARLS. In the macro-data model, selecting thecoverage rate, replacement rate and contribution rate of endowment insurance and otherindicators can far better reflect the stage of development of the endowment insurancesystem. In the micro-data model, we try to create dummy variables from two aspects interms of the dependence of the aged and work type, which also reflects a multi-trackcharacteristic. In the empirical analysis, advanced econometrics methods are adoptedobeying the model form and the feature of data. For example, in the analysis of paneldata model, we employ redundant variables test, endogenous variable test as well asGMM method. The analysis using micro-data model also adopts a host of method in thelikes of redundant variable test, heteroscedasticity test, endogenous variable test andfeasible generalized least squares method.Not only panel data but also household survey data, the empirical results bothindicate that endowment insurance has a significant positive influence on householdconsumption. From a macro-level, the coverage rate, replacement rate and contributionrate of endowment insurance and household consumption are positively correlated.Besides, the reverse development of coverage rate and replacement rate causes, to acertain extent, the internal counterbalance on endowment insurance’s pulling effect onhousehold consumption. As the payment ratio of endowment insurance is fixed, thedifferences in contribution rate inevitably embody the differences in fiscal subsidies.Therefore, raising the replacement rate of endowment insurance and increasing fiscalsubsidies will both contribute to the pulling effect endowment insurance casts onhousehold consumption. Still from the macro-level, under the same conditions, residentswho make a living on pensions have higher living expenses, so does the residents whoare occupied in enterprises or the government institutions.Besides, other important conclusions we got from the paper are as follows. First,integrated use of consumption theory including precautionary savings, internal andexternal habit formation and liquidity constraints help explain the excessiveconsumption of urban residents’ smooth and overly sensitive phenomenon. Second,aging population has a two-way impact on consumers. On the one hand, it forceshouseholds to increase spending on children’s education and medical treatment for theelderly, thus increasing household consumption; on the other hand, it raises the concernover endowment and precautionary saving motive of residents, thus suppressing consumption. Finally, under the same circumstances, staff in government andinstitutions compared with that in enterprises has less than average propensity toconsume. Our country’s anti-corruption campaigns do not inhibit consumer demand, butalso may gradually prompt a shift from abnormal consumption to healthy consumption,achieving the consumer-driven economy.Based on the conclusion we got from the research, the paper holds that expendingconsumption demand not only requires perfected endowment insurance system, but alsoa wholesome income growth mechanism and at the same time, low down the residents’expectation on the uncertainty of spending. What’s more, adjusting populationdevelopment policy and descending expectation on uncertainty of income are of greatneed.