The Influence Of Personal Consumption Credit Constraints And Uncertainty On Consumption Of Urban Residents

The consumption is both the terminate and new starting point of social reproduction, its extension and structure upgrading are the direct motive of economic growth. Recently, the final consumption rate of China declined year by year. Expanding domestic demand has become an important target for government to set out policies, so it is of great importance to research on consumption. Urban residents consume 73.2 percent of total consumption in 2005; there is no doubt that it worth for us to pay attention to the urban residents'consumption. Therefore, we choose the urban resident's consumption as object of this paper.Over the past decades, western consumption theories have experienced a full-grown development, but they were used to research on China consumption problem, the economic reform was usually neglected, so it was very difficult to explain China consumption problem if we completely copy western consumption theories. Few of domestic scholar separated credit constraints and uncertainty to consumption. Owing to this, this paper integrates western consumption theories and the practical situation of our country and chooses credit constraints and uncertainty as the breakthrough points to research on China urban consuming behavior.Firstly, this paper describes current situation of credit constraints and uncertainty, from which we know urban residents still face strong credit constraints and uncertainty. Secondly, we point out the advantages and disadvantages of western consuming theories. To prevent selecting uncertainty index arbitrarily, we choose Dynan precautionary demand for saving model, and add credit constraints to it. Thirdly, this paper uses two-stage least squares method to analysis urban residents consumption, the 1999—2005panel data is adopted, in the first stage we choose the standard deviation coefficient of food expenditure and the nominal growth rate of the sum of education and healthy care expenditure as instrument, and then add credit constraints to analysis expectancy of consumption growth rate in the second stage. Finally according to empirical research result, we provided some policy suggestions on how to lower credit constraints and uncertainty.