Study On The System Arrangements And Policy Effects Of Consumption Subsidies To Expand The Rural Domestic Demand

Theoretical analysis and international experience show that expansion of domestic demand has an important role to maintain sound and rapid economic development, consumption demand is the dominant demand in the three major demand:investment, consumption and net exports. However, China’s economic growth has been relying heavily on investment and exports since the reform and opening up, and domestic demand as an economic driver has not played its due role, the final consumption rate is far below the world average. Especially in recent years, rural residents savings substantially increased, and far more than the rural per capita net income growth speed. It is obvious that the rural effective demand is relatively insufficient. In order to expand rural consumption, the government implemented and improved consumption subsidies, and launched "home appliances to the countryside","cars、motorcycles to the countryside" and a series of policies to support and benefit agriculture, rural areas and farmers, which actively cultivated the new growth point of the rural consumption and strengthened the function of consumption in driving economic growth.Consumption subsidies are specific free grants for economic organization or urban and rural residents, which is applied according to the objective requirements for a certain period of political and economic situation by the governments at all levels, and the intention is to adjust the distribution, circulation and consumption systematically. Consumer subsidies have two forms:cash subsidies and price subsidies. Financial subsidies on consumption, no matter what kind of form, are the governments’ funds that transfer to micro-economic agents to use, and will expand consumer demand.Therefore, under the conditions of the governments’ financial constraints, it is worthy of attention and study that how to full play the leverage and multiplier effects of financial subsidies to effectively expand domestic demand and to ensure stable and rapid economic development through system arrangements of consumption subsidies.Taking the system arrangements of consumption subsidies to expand the rural domestic demand as the main line, the overall goal of this study is to build the institution system of expanding domestic demand from the perspective of subsidy forms and subsidy products based on the aspect of efficiency, to empirical study the policy effects of existing subsidy system for rural consumer durables, and to put forward policy suggestions to perfect rural consumption subsidies. Major research contents and conclusions are as follows:Research content1:Form choice of consumption subsidies to expand the rural domestic consumption. Through theoretical analysis and empirical research, the paper discussed the form choice of consumption subsidy to expand rural domestic consumption in the context of low level of industry overall capacity utilization and highlighted problem about idle capacity demand for export demand.Research showed that price subsidies not only avoided goods and service crowding-out effect generated when a portion of cash subsidies was saved by consumer under the form of cash subsidies, but also reduced the price of specific goods, improved the farmers’ marginal consumption tendency, expanded the rural demand effectivly through connecting the farmers’subsidies income with the consumption of the specific products.Research content2:Product choice of consumption subsidies to expand the rural domestic consumption. According to the analysis of substitution effect and income effect which generate from price subsidies of different consumer goods, combining with empirical research on income elasticity and price elasticity of all kinds of consumer goods or service, the research indicated that because of the high income elasticity and high price elasticity of home appliances demand, on the one hand, the home appliances demand was more sensitive to the price subsidies policy, on the other hand, the income effect was greater than the substitution effect that could avoid massive crowding-out effect to the consumption of other consumer goods and services along with the increase of home appliances consumption. Therefore, the price subsidies policy to the home appliances can expand the rural domestic demand effectively. The paper roughly estimated that the multiplier of current consumption subsidies policy to expand the rural domestic demand was2.66.Research content3:The demand laws and general characters of the rural consumer durables consumption. Based on studying the laws of consumer durables which different from fast moving consumer goods, the paper sorted、summarized and sumed up the time-sequence characters of the rural consumer durables consumption, and focused on analyzing the present situation of rural consumer durables consumption. Study indicated that there was a big gap between urban and rural residents in the consumption of consumer durables currently, and regional differences and internal divisions were obvious in consumption of rural durable consumer goods.Research content4:The main object of the policy adjustment for expanding the rural domestic demand:middle-income people in rural areas. On the basis of defining the concept and standards of middle-income people in rural areas, the paper selected the panel data of per capita net income and eight categories living expenses of farmers grouped by income level in "China Statistical Yearbook", empirically studyed the marginal propensity to consume of rural residents of different income levels based on the improved ELES model, analyzed consumption structural features of rural middle-income group combined with Engel’s coefficient, degree of change in consumption structure and consumption structure similarity coefficients Etc. Research shows those who are middle-income in rural areas are in transition period from well to well-off, from pursuing consumption quantity to consumption quality, whose marginal propensity to consume are higher than rural high-incomes groups and show a slow growth trend, and who has constituted the pillar groups having the most active and power of spending in current rural community. And the consumer behavior and consumer attitudes of middle-income people in rural areas are the vane in low-income groups’consumption with a significant demonstration effect, which is the main force in driving consumption and stabilizing the consumer market.Research content5:Empirical analysis on the benefit incidence of consumer subsidies policy. Using field survey data of farmers in three regions:southern, middle and northern in Jiangsu Province, on the one hand, the paper calculated the Gini coefficient change of per capita income before and after the consumer subsidies and studied the effect of consumption subsidies to different income levels farmers by building benefit ownership curve of consumption subsidies policy. On the other hand, the paper drew the distribution ratio and basic form of farmers’consumer durables layered before and after consumption subsidies by calculating the index of consumer durables, and studied the effect of consumption subsidies to different consumption levels of farmers. The results illustrate that the income distribution among farmers of the consumption subsidies on consumer durables is indeed in imbalance and it subsidizes middle-income and low-income persons who have both consumer willingness and purchasing power, which not only narrows the relative gap between rich and poor, but also conducives to stimulate the sustained and effective growth of consumption.According to the above conclusions, the paper suggested that the consumption subsidies policy should be improved by applying measures as follows:implementing the mechanism of differential subsidy burden, increasing the policy flexibility of consumption subsidies, strengthening the policy propaganda, improving market monitoring mechanism, providing marketable subsidies products and optimizing the consumption environment in rural areas and so on. At the same time, some measures should be used to promote stable and sustainable increase in consumption, such as promoting farmers’ income increasing steadily, improving rural social security system, strengthening policy support, improving farmers’ consumption attitudes and so on.