Studies On Countryside Inhabitants' Consumption Function In China

This paper is on countryside inhabitants' consumption function in china by the way of empirical analysis. On the basis of the basic theory, the theoretical assumptions of China's rural consumption behavior has been made. And then estimates the consumption functions in two periods of before 1978 and after 1978, during which, the well popular method of time-varying parameter estimation has been introduced in. the basic Research conclusions are as follows:1 .Conclusions(1)Before 1978, China's countryside inhabitants are assumed to be a kind of self-consumption, passive and short-sighted of the original consumers; and after 1978, China's countryside inhabitants face to the environment of the neo-classical economic theory to a certain extent, as well as a description of internal settings. but the future uncertainty "drag" the cautious consumers.(2) based on the fixed-parameter model of the period of before 1978,the empirical analysis shows that: During this period, the real income replaced by the real consumption is the fatal factor of consumption. According to estimation results of the time-varying parameter, we can see that the role of monetary income ascends obviously despite its limited role, and the role of real income decreased hardly.(3) The results showed that China's countryside inhabitants' consumption behavior basically abided by the absolute income hypothesis, the life-cycle hypothesis and lasting income hypothesis. The results showed that the absolute income, income distribution gaps, permanent income, temporary income and other indicators important factors in household consumption.(4)The cointegration test in the period of 1978 to 2005 shows that countryside inhabitants' consumption and income can't get the status of cointegration. But through the introduction of virtual variables, the phased cointegration has been achieved, so as to the "varying parameters cointegration" concept (Hang Bin, 2006).(5)The results of ECM function analysis indicates that the coefficient of the income growth rate 1>α>0, that as long as the increase in income growth, consumption growth will also be an increase, by the reason of approximately balanced state of the long-term consumption and income. The coefficient of ecm_t-1 <0 and the result has been approved statistically, which means the error correction mechanism plays a role in controlling and regulating.(6)The estimation outcome of the time-varying ECM shows that: error correction mechanism of China's countryside inhabitants works as "partial correction to the negative direction", which means:①the last century since the mid-1990s after a series of reforms, the countryside inhabitants had to face the future income and expenditure increased uncertainty, short-term and long-term income. The consumers take a more cautious attitude toward the situation even if growth in the income was evidently increasing;②Facing to the increase of income, the countryside inhabitants will choose a "passive" consumption patterns, which means the increase in the level of income that is not able to create a larger consumption rate, that part of the increase in income will be a relatively fixed rate of consumer spending, and the remaining part can be transformed into a savings.(7) The empirical results show that we should take the policy of increasing the income as the basis, and take the policy of improving the rural consumption environment as the key point.2.Suggestions(1) It is necessary to formulate income growth policies to increase the income of countryside inhabitants; adjust the income distribution policy to balance the income gap.(2)The building of regulations, including the social security system of the countryside market, should be improved as soon as possible, to provide farmers a stable market and regulations expectation. So as to enhance the confidence their confidence in the future of life, thereby increasing the income of farmers is also conducive to the formation of stable income expectations.(3) Establishment of an appropriate and reasonable consumption of consumer consumption concept.(4) actively reform the consumption policy and the policy to curb consumption, take the policy to encourage rational consumption to promote consumption of goods from the self-accumulation mode of credit support gradually to the change. In the gradual transformation of traditional consumption concept of countryside inhabitants, use the market mechanism "screed" the negative impact caused by the cautious consumption concept. to invert the closed consumption concept is the starting point for activating thecountryside consumption market.