The Effect Of Public Goods Supply By Government On China’s Rural Residents Consumption

In recent years, the relative lack of demand in China has become the prominent factors restricting the economic growth. Compared with the western countries consumption contribution to economic growth rate of80%, China’s consumption contribution to economic growth rate of50%has the very big disparity. In2008, under the background of international financial crisis, China implemented a proactive fiscal policy, monetary policy in order to expand domestic demand to revitalize the national economy. The reality is, the existence of China’s urban-rural dualistic structure, leads to the lack of education, health public expenditure in rural area, which not only suppresses the ability of farmers themselves, reduce a farmer’s willingness to consume, but also affects the sustainable development of the whole national economy. In recent years the Chinese government increases the public investment in education and medical care in rural area. Whether public investment in health and education will help to promote the demand of rural residents, what is its mechanism, and which kind of public investment between education and health has the largest contribution to consumption growth of rural residents need further empirical research. Under this kind of background, this paper set out to study the relationship between education, medical public goods supply and consumption of rural residents, and is divided into eight chapters.Based on the lack of domestic demand, especially the low level of consumption of rural residents in the background, Chapter1puts forward the problem. Chapter2describes the classical, modern consumption theory and provides a comprehensive review on the research status of rural residents’consumption, the supply of rural public goods and the consumption effects of public expenditure.In Chapter3, based on the rational behaviour hypothesis of the famer, the thesis analysizes the intertemporal consumption behavior, and based on the previews of precautionary saving and human capital, the thesis analysizes the influence mechanism of education and medical treatment public goods supply on the consumption level and the consumption structure of rural residents, as a result, sets up theoretical analysis frame. In Chapter4the thesis has analyzed the situation of our government investment in education and health care in rural area, from which we can see the lack of the supply of education and medical treatment public goods in rural area, and provides a realistic basis for further study.Based on the hypothesis of public spending on education and health care to reduce the precautionary saving, using the provincial panel data of China’s eastern, central and Western areas from2003to2010, the thesis has built the model and estimated the impact on the propensity to consume of the rural household because of the three regional education and medical public goods supply in Chapter5.The empirical results show that, the education public goods supply has no significant influence on the propensity to consume of rural residents in the eastern, central and western regions; and medical public goods supply has obvious crowding-in effect on the rural residents’propensity to consume in the eastern region, and the complementary effect is greater than the substitution effect. Medical public goods supply has the obvious crowding-out effect on consumption in the central region. Unlike previous studies:Although the livelihood public expenditure (such as public education, public health, pension expenditure) is helpful to decrease precautionary savings and increase the propensity to consume in theory. But in reality, due to the differences of the investment direction and investment efficiency of the medical expense, not only can the livelihood public expenditure not decrease precautionary savings, but also it may inhibit the consumption. For the western region, and medical public goods supply has no significant effect on rural residents’propensity to consume. At present in the western rural areas, the original medical conditions are very poor; the infrastructure is weak, with the increasing of the medical public goods investment, the precautionary saving of the peasants in the west area is not increased. In addition, the abolition of agricultural tax policy has lightened the burden on rural residents and increased precautionary savings, and it shows the importance of the supporting measures of public expenditure.From the perspective of education and medical public goods supply improvement of human capital, the thesis analyzed the education and medical public goods supply effect on the propensity to the rural residents’ consumption from three dimensions of the eastern, central and western areas in Chapter6.The empirical results show that the influence on living consumption coming from knowledge capital and health capital caused by the input of education and medical public goods in different regions are different, and the per capita net income of household, the control variables, such as agricultural tax reduction, the elderly dependency ratio significantly affect the consumption of rural residents.First of all, the upgrading of knowledge capital of rural residents effectively promotes rural resident consumption tendency in Western China, but the effect is not obvious in the eastern and central regions. The specific results are as following:the average knowledge capital of labor force in western provinces increased by1%, the propensity to consume of rural residents will increase0.173%, The culture level of rural residents in western is low, the economic foundation is weak, and the increasing of average knowledge capital of the rural labor force promotes the upgrading of the employment ability of local farmers and increases the level of family income and the propensity to consume.Secondly, the upgrading of the health capital of rural residents effectively increases rural resident consumption tendency in eastern region, but it is not obvious in the central and western regions. The input of medical public expenditure into the township hospitals can more effectively promote rural residents consumption propensity than directly into the village medical clinic Specific performances are as following:the township health personnel of per million rural populations in the eastern provinces increased by1%, the propensity to consume of rural residents will increase0.058%. But the significant tests weren’t passed in the central and the western regions.This can be explained as:generally the medical basis of every rural area is poor, the capital of investment is less and investment efficiency is low in our country, especially in the central and western regions. And according to the analysis from Chen Dong and Wang Xiaoxia (2010), the investment efficiency of rural health is also affected by the size of investment, called "threshold effect", and therefore within a short time it is difficult to achieve the expected effect. The coefficient of the village health clinic personnel per thousand rural population is negative, and didn’t pass the significant statistics test. Village health clinics are primary medical care organizations and play an important role in the common injury, disease diagnosis and children’health care. In recent years, because the public investment is little, resulting in the lag of village medical institutions in hardware and software facilities, limiting its role, and it is not conducive to meet the basic health service needs of rural residents.In order to more thorough and meticulous study the education and medical public goods supply influence on the consumption of various goods of rural residents, the thesis analyses the educational and medical public goods supply impact on the rural residents’ consumption structure, based on the model of QUAIDS and using the provincial panel data of27Chinese (except Beijing, Tianjin, Shanghai and Chongqing) provinces and autonomous regions across2003to2010in Chapter7.The results show that:the increasing of the public education investment proportion doesn’t improve the rural residents’consumption structure, but improve the Engel coefficient, and from the education investment results, knowledge capital optimizes and upgrades the consumption structure. Nowadays the knowledge capital increase largely comes from private family investment in education, so we can see that the government education investment result on rural residents’consumption is not satisfactory. The increase in the proportion of medical public investment has no obvious improvement of consumption structure, and from the medical investment results, the increase of the nearer village clinic staff proportion is conducive to the upgrade of the rural residents’ consumption structure. In the future the investment in village or community medical care should be strengthened to help the rural residents see doctors. To co-ordinate the urban and rural medical insurance system, and let rural residents really enjoy the national health welfare. The government’s abolishment of agricultural taxes is reducing the burden on farmers, and promotes the upgrade of rural residents’ consumption structure. From the regional perspective, compared to the Easter, the rural residents in central and western areas pay more attention to the improvement of health and living, the consumption structure has also been upgrading.Based on the previous analysis, from the fowling aspects:increasing rural education and health total supply, optimizing the supply structure of rural education and health public goods, narrowing the area differences of the rural education and medical public goods supply and improving the investment efficiency of education and medical public goods, the thesis puts forward to operable countermeasures and suggestions to accelerate the improvement of rural area education and medical public goods supply mechanism to promote rural residents consumption growth in Chapter8.