The Empirical Analysis Of Residents' Consumption Function In China

For an economy and society, the household consumption is an important element no matter in micro or macro perspective. The study of law of household consumption has profound significance for us to correctly grasp the operation of the market, scientifically formulate economic policies, and even to ensure the sustained and health development of economy. Since the 1978 reform and opening up, China's economy has been steady progressing, and the past 2009 has also successfully completed the eight percent protection target in growth. Household consumption is a major contributor to economic growth, but the household consumption of China is always under shortage situation. So what is the reason of that? What happened to household consumption level in China since reform and opening up, and what kind of differences exit between provinces?To answer those questions, this paper employs panel data model with provincial data, studys on household consumption function of the sub-periods (1978-1989, 1990-1999 ,2000-2008 years) with regression analysis, the results show that all the three periods consumption function parameters have passed the significance test, and therefore can be used to analyze the level of consumption in different periods. Consumption function is not a single, different periods have different consumption function, which reflects the level of consumption in different periods. Besides, after adding spending habits variable into the model, the household consumption function has still passed all the tests, which indicates past consumption has significant effects on current consumption.Based on the study of China's household consumption function in the sub-period with panel regression, and in order to take a in-depth consumption analysis and research, this paper also made a sub-period and sub- regional cluster analysis on two parameters of consumption function(self-consumption and the marginal propensity consumption). The results showed that: provincial and municipal people's consumption is highly relevant to the level of economic development, different periods have significantly different consumption level. In addition, by comparing the marginal propensity consumption to the share of residents income of GDP during the period of 2000-2008, an important conclusion can be obtained here: the willingness of using current income for consumption is pretty high, but income-GDP ratio is very low, which to some extent caused the situation of insufficient consumption in China. Therefore, this article gives recommendations in the end: to increase the level of Chinese consumption, increasing income and income-GDP ratio is crucial important.