Research On Uncertainty, Household Saving And Consuming Behavior

In recent years, the consumption which can improve sustained economic growth of the domestic economy has become a research focus due to the sluggish investment and exports. The question as opposed to the current low rate of consumption is the too high household savings rate. Why does the substantial spend delay still exist at the background of rapid income growth rate? Many scholars have done a lot of work, trying to explore the motivation behind the high savings rate. Most of them discussed and tested the consumption function based on the theoretical framework of traditional Life Cycle-Permanent Income Hypothesis. According to this theory, rational consumer decisions should be more inclined to borrow and spendin the case of low income levels, low interest rates and high economic growth environment. However, the reality was different. The Precautionary Theory gradually developed from last century nineties provides a new way to answer this question. In the situation of our imperfect credit market and various social security systems, the residents will have to adopt precautionary savings as the self insured meannaturally when facing to the income uncertainty. At the basis of the reviewing existing literature, this dissertation selected the recent advances of Precautionary Theory----Buffer Stock Saving Model, to analyze the saving and consuming behavior in the face of uncertainty atboth micro and macro aspects.Firstly, the micro part applied the large family trace data-China Health and Nutrition Survey (CHNS) six years’data during the 1997-2011.ChapterⅢ measured the proportion of resident precautionary savings, Chapter Ⅳ verified the urban and rural residents precautionary saving behavior and their life cycle characteristics. Secondly, the macro part, that is Chapter V introduced the Sticky Expectation analysis method, added up the future stickyuncertainties, and then examined its impact on consumer behavior.The data used of this part is the urban 2000-2012 quarterly panel data of 28 provinces. The main contents, methods and main conclusions of this dissertation are as follows:First, the household which the age of head under 50 years old was in line with the behavioral characteristics ofBuffer Stock Model, namely these households reserves buffer stock during working time and reserves for retirement after the age of 50 years old. Therefore, the behavior will be different after50 years old, that is, smooth spending by employing their buffer stock at work time.Second, the overall proportion of household precautionary savings was about 51%-55%. The specificmeasurement applies empirical model of the relationship between household wealth and permanent income, uncertainty under the framework of the Buffer Stock Model, by the use of China Health and Nutrition Survey 1997-2011 six yearstracking survey data. After estimating the relationship between uncertainty and household wealth, then setting the uncertainty simulation according to the upward estimates, we could get the household wealth corresponding to different uncertainty obtained. And then from the definition of precautionary saving, calculated the proportion which caused by uncertainty to the overall wealth. The proportion of rural sample was calculated in the same way. After the exploration of the relationship between household income uncertainty and household wealth accumulation, we found both permanent income and household uncertainty had a significant positive effect on the accumulation of household wealth, and the former was bigger than latter. As to rural households, the impact of the uncertainty to wealthaccumulation is much higher than that of urban households. The estimators of uncertainty was also higher than the permanent income among rural households. Therefore, the main driving factors of rural households to wealthaccumulation was the precautionary savings.In the case of uncertainty eliminated completely, the proportion of the overall sample of precautionary savings was about 51%-55%, the proportion of rural households was 8% higher than the overall sample. However, actually the income uncertainty may be reduced, but it is difficult to completely eliminate. When income uncertainty reduced by half,32%-35% of overall wealth would be released for consumption, while 39% in rural households, which indicated the greater potential among rural consumer market. Therefore, promoting equitable income distribution, reducing income uncertainty and. increasing farmers’income could be become policy concerns.Third, accompanied by thedepth in medicalinsurance reform and the changes in household life cycle stages during 1997-2011 years, trends were shown in savings behavior characteristics of each stage. During the sample period, the age of household heads has experienced from30.62 to 44.62 years old, so we could use the same micro sample data to analyzethe differences of precautionary saving behavior, the effect of medical insurance and household savingslife cycle characteristic among the six survey years in sequence. In general, despite a steady increase in permanent income which influenced the household saving behavior highest than others, but the overall trend to household savings behavior had decreased since 2000. While the income uncertainty had a significant effecton promoting household wealth accumulated in the middle of survey years as the second-largest factor in the impact of household savings. Age of household head, household size, child dependency ratio, family health status showed a certain life cycle characteristics as age goes, the effect on household savings behavior changed from negative to positive.The overall trend is that, as medical insurance reform been depth and universal, the effect on the household savings behavior had been more and more obvious. For the sake of alleviating medical expenses to chronically ill household, it’s changing from no effect in the beginning to completely relieved in 2009, and then only partially relieved in 2011,which showed the effectiveness and deficiencies of China’s medical insurance reform.In addition, with the rise in household house ownership rates, the impact of the expected house price growth rate on consumption had changed from crowding-out effect to the wealth effect. Urban and rural samples were estimated thereafter, we found many dissimilar behaviors in the same period between urban and rural households. Such as urban was weaker than rural on the impact of permanent income; the opposite direction of the impact within the same year in family size and rate of child dependency; the variablehousehold head gender was significant just in rural sample; medical insurance influence coefficients grow faster in rural sample than urban. These are to some extent, reflects the heterogeneity between urban and rural households in terms of income levels, family values, family structure and so on.Fourth, the sticky coefficient or inter-dependence degree is around 0.6, which means that 60% of consumers would be affected by consumption habits or update information lag and other factors, leaving the consumer behavior appears sticky. So, path dependence of consumption seems strong. The above three conclusions had applied a non-continuous household micro survey data, and thus, the intertemporal dependence on household savings behavior could not be analyzed confined to the data limits. As a complement and extension, we use 2000-2012 inter-provincial quarterly panel data to study the cross-dependent consumer savings behavior of the shorter economic cycle.That is, the current consumption and saving behavior was not only influenced by the uncertainty of the current period and the next period, but should be subject to the future multiple periods accumulated uncertainties. In this part, we analyzed consumingand savingbehaviorsafter accumulated each future periods’uncertainty. According to the sticky coefficient estimates, we selected the expected consumption growth rate as a variable for uncertainty, and then constructedan estimator contained uncertainty from the current period and future multiple periods accumulated impacts.And finally, we got the coefficient and the following results. When the expected consumption growth rate changed from2% to 3%, the actual value of the current quarter spending would be reduced by RMB463.5. This means that the impact of uncertainty to consumer behavior is very important.Therefore, we should continue to insiston distribution system that distribution according to work is dominant and diverse modes of distribution coexist, promote equitable income distribution and narrow the income gap between urban and rural areas. Especially for rural residents, income structure upgrading should be further accelerated, so as to gradually increase wage income and operating income among rural households. Furthermore, speeding up urban and rural social security system to the integration process, improving the rural social endowment insurance policies, gradually eliminatingthe fear of attacks of urban and rural residents, especially low-income groups, forming a good consumption expectations, would reduce the precautionary savings motive of households.