| Currently,the consumption rate of residents is still at a low level in China.At the same time,as socialism with Chinese characteristics has entered a new era,the principal contradiction has evolved.What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.Under such a dual reality background,this paper attempts to explore how to combine the expansion of consumption with the improvement of people’s quality of life from the perspective of income shocks and household consumption.The purpose is to fully release the potential of consumption growth and enhance the fundamental role of consumption in economic development.At the same time,it provides a research basis for improving the systems and mechanisms that promote the people’s growing needs for a better life and bring people’s well-being to a new level.Based on this,this paper analyzes the impact of expected and unexpected income shocks on household consumption based on economic theories such as life cycle,precautionary saving and liquidity constraints model.On this basis,we carry out empirical analysis.First,from the perspective of household consumption,taking private transfers as an example,the China Household Finance Survey(CHFS)cross-section and panel data matching are used to identify whether households obtain private transfers.Based on the propensity score matching and the difference-in-differences model,we examine whether obtain private transfers and the impact of the absolute and relative size of the income shocks brought by the private transfers on household consumption expenditure and consumption structure.Second,using the data of the China Family Panel Studies(CFPS),we empirically test the asymmetric response of household consumption to positive and negative transitory income shocks.We introduce household assets to examine the role of asset liquidity on the impact of positive and negative income shocks on household consumption.Then,taking income shocks and household consumption as the breakthrough point,we explore the changing trends and internal connections of household income inequality and consumption inequality by estimating the persistence of income shocks and the degree of consumption insurance.Finally,from the perspective of household credit and asset allocation,we focus on the impact of household leverage ratio,credit availability and hand-to-mouth(HtM)status on marginal propensity to consume.We try to explain how to effectively promote consumption from the perspective of the heterogeneity of the marginal propensity to consume.This paper draws the following conclusions.First,obtaining private transfers brings positive income shocks to households.It promotes the upgrading of household consumption expenditure and consumption structure.It leads to a significant increase in total household consumption expenditure of about 6.7%,and the proportion of development and enjoyment consumption expenditure increased by at least 2.0%.In terms of the absolute size of the income shocks,for every 1%increase in private transfers,household consumption expenditure increases by 1.1%,and the proportion of development and enjoyment consumption expenditure increases by 0.4%.From the perspective of the relative size of the income shocks,for every 1%increase in the ratio of private transfers to household incomes,household consumption expenditure increases by about 4.2%,and the proportion of development and enjoyment consumption expenditure increases by 2.3%.Second,household consumption has asymmetric responses to positive and negative transitory income shocks,and the response to negative transitory income shocks is greater than the response to positive transitory income shocks.Highly liquid assets play a significant role in consumption responses to positive and negative transitory income shocks,while consumption responses to positive and negative transitory income shocks are not affected by illiquid assets.Third,household income inequality is higher than consumption inequality.Income inequality shows an inverted U-shaped trend that first rises and then falls,while consumption inequality has an upward trend while being stable.Inequality is largely reflected in residual inequality.Both the permanent income shocks and the transitory income shocks have partial insurance.The 10%permanent income shocks will bring about 1.3%consumption change,while the 10%transitory income shocks will bring about 0.9%consumption change.The inconsistency in the trends between income inequality and consumption inequality can be explained by the persistence of income shocks and the degree of consumption insurance during this period.Fourth,there is heterogeneity in the marginal propensity to consume of transitory income shocks.The household credit and asset allocation are important sources of the marginal propensity to consume heterogeneity.In general,households with high leverage ratios have higher marginal propensity to consume in response to transitory income shocks than households with low leverage ratios.Compared with households without credit,households with credit have a higher marginal propensity to consume.At least 36%are HtM households in China,and more indebted households are HtM households.The marginal propensity to consume of wealthy HtM households is higher than that of non-HtM households,especially wealthy HtM households with high leverage are more sensitive to income shocks than other households.However,the poor HtM households is lower than that of non-HtM households.This implies that household credit and asset allocation play an important role in the response of consumption to income shocks.Combined with the research conclusions,this paper proposes the following policy implications:First,adjust and optimize the income distribution pattern,and improve the consumption capacity.On the one hand,continue to increase the share of labor income in the primary distribution of national income,promote the expansion of middle-income group.On the other hand,increase household non labor income and multi-channel increase the property income of urban and rural residents.At the same time,attach importance to the role of the third distribution,gradually reduce income inequality and consumption inequality,narrow the gap in living standards of residents,and make the achievements of reform and development more equitable and beneficial to all people.Second,encourage private transfers within and between households to give full play to the role of private transfers in promoting household consumption.It also helps to promote common prosperity for all people.Third,ensure the stable development of the labor market and reduce transitory income shocks.At the same time,we must focus on strengthening education and social security to enhance the ability of consumption insurance.In addition,relevant departments should guide commercial insurance institutions to increase product innovation,develop insurance products,and better play the role of insurance products in diversifying risks and smoothing consumption.Fourth,when formulating or implementing relevant fiscal and monetary policies,such as government transfer payments,tax reform,and other redistributive policies,government departments should also take into account the role of household assets in consumption changes,especially the effects of housing assets and financial assets.Fifth,in the short term,for the same scale of transfer payments or tax cuts,if it can be implemented for wealthy HtM households,the precision of the policy will be improved,resulting in a larger consumption scale.In the long run,in order to give full play to the effectiveness of consumption stimulus policies,policy measures should be taken to promote groups with lower marginal propensity to consume to increase their marginal propensity to consume.In terms of household asset allocation,it is necessary to further improve the development of the capital market,provide households with more abundant and diversified investable assets,reduce the overall tariff level of social financial services,reduce the cost of asset realization,and optimize the allocation of household assets to improve households’ability to against income shocks.In terms of household credit,the consumer financial market should be regulated,the development of household consumption credit should be encouraged,the credit capacity and availability of households should be improved,so as to provide assistance for the release of household consumption potential and the realization of high-quality economic development. |
