Sichuan Income Research, And Consumer Relations

Consumption accounts for two-thirds of national income, hence it is the main factor to promote economic growth. Since the Keynesian absolute income hypothesis has been set up for the study of consumer issues, in different periods ,so many economists who come from different angles for different focus on the consumer have carried out an in-depth research, a number of theories on consumption theory have been created to help to perfect the contribution and provides practical guidance to theoretical work. In this paper, based on the relationship between income and consumption model studied by domestic and foreign scholars, using data from 1978 to 2007 of Sichuan province, the author makes use of ADF unit root test, Engle-Granger co integration test, error correction model to give a research on the relationship between income and consumption of the people who live in urban and rural areas of Sichuan by using co integration analysis, theorize error correction model, and analyze the differences between them. Further, this paper conducts an empirical research on the relationship between residents'stable income and consumption by introducing Friedman's permanent income hypothesis to the error correction model. The results show that, regardless of actual income or constant income, there exist the long-run equilibrium, short-term dynamics of co integration relations between urban-rural income and consumption. People's consumption and income are always closely related. In order to stimulate people's consumption, efforts should be given to promote income growth. Still, rural residents are more conservative when consuming, and its short-term dynamic model of adjustment is also lower than that of urban residents, demonstrating that rural residents at this stage are cautious of the consumption. Consequently, in addition to promoting the province's overall income growth, the Government in the formulation of policies should intensify the construction of social security system of rural areas and, effectively resolve the issues of peasants'life.