| This paper overviews Western consumption behavior theories and exemplifies them numerically in the form of consumption functions. Then the author discusses differences and similarities among all those consumption behavior theories as well as their consumption functions. Against the varied state system background, Chinese scholars and experts manage to figure out Chinese characteristic consumption behaviors, which are different from their Western counterparts. They have reached some unique Chinese consumption behavior conclusions out of Western consumption behavior theories. Tracking down their deductions, the author outlines several consumption behavior hypotheses on current Chinese consumers.The life cycle model suggests that middle-aged people tend to save money for their retired days with advancement of their ages while they will spend the money after their retirement. Yu Yongding and Li Jun proposes that Chinese marginal propensity to consume (MPC) fluctuates around such major saving goals as retirement expenditure throughout their lifetime. On this basis, one would want to estimate an empirical relationship between aggregate consumption, income and wealth, where the MPC is allowed to change with the individuals'age when testing for age structure effects. Since both theories and foreign empirical macro-studies suggest that, it should hence be tested whether changes in the age structure of the population is an omitted variable in the consumption function. The author borrows the term"the ratio of'prime-saver'age group to the rest of the adult population"(AGE) from Western Consumption Economics serving as an index of population age structure, which has been proven appropriate by Solveig K. Erlandsen and Ragnar Nymoen in Norway. A Chinese consumption function model, including the population age structure variable, has been formulated.In this paper the author tests for population age structure effects on aggregate consumption in China and thus testify consumption behavior hypotheses, by constructing a Chinese consumption function model, which takes account of changes in the population age distribution. The model is estimated on Chinese yearly time series data over the period 1990-2004. The test is finished with three steps. The first step presents the econometric evidence for the Chinese consumption function whichincludes an age structure variable and derives the corresponding error correction model. And the second step explains how the population age structure variable represents an extension of the existing Chinese consumption function, which contains the lagged de-trended consumption variable. And the last step focuses on tracking down the population age structure's effects on aggregate consumption. The population age structure effects on aggregate consumption can be affirmed by means of"the ratio of'prime-saver'age group to the rest of the adult population"(AGE). The paper demonstrates how changes in population age distribution affect the aggregate consumption in China.Experiments show that the numerical effect on the aggregate consumption of age structure changes is substantial. An important result in the paper is that changes in the population age structure can have significant and numerically important effects on aggregate consumption in the form of"the ratio of'prime-saver'age group to the rest of the adult population"(AGE). By analyzing Chinese time series data we find that changes in the age distribution of the population have significant effects on aggregate consumption and individuals'savings. The author shows, by using a small econometric model of consumption, income and wealth, that those changes in the age structure represent important challenges for policy. Quantifying the effects of population age structure in the Chinese consumption function helps to forecast changes in aggregate consumption and individuals'savings, which will be used for reference in guiding social consumption and organizing social production in the interest of macro economic development. |
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