Research On The Impact Of Inflation On Residents' Income In China

Since1978-Reform and opening up, China has achieved high development in Market Oriented Reform and modernization process.At the same time, inflation has shrunk residents of income and savings.Firstly, thesis analyses the general theory of the impact of inflation on residents' income. The income redistribution effect of inflation makes the wealth transfer between different groups. The fixed income residents are impaired, meanwhile the floating income residents benefit. When the currency exceeds the real requirements in the circulation, more income taxes are collected to generate the revenue in the tax effect of inflation.Through income and substitution effects, inflation will also impact on savings and consumption. Resident individual on inflation also had a sense of revulsion, from a negative impact on the psychological level. how much is the welfare cost of inflation? According to the theory of welfare economics, with the income compensation for the cost of inflation, residents would have a Pareto optional state at the same utilitylevel. therefore, the income of compensation in the ratio of total GDP is the welfare cost of inflation. Scholars today still follow the method of income compensation to study the welfare cost of inflation.With the combination of theory and the analysis of Chinese practices actual income. Sharply rising prices, especially the consuming goods such as grain, vegetables and so on, have brought pressure to residents' ordinary life. The real income of the majority of labor income-based falls, and individual income tax has increased. Therefore, residents who own less ability to cope with inflation, save most of their income with less consumption. The rich often get their advantage in income distribution and redistribution mechanism to avoid the asset shrinkage and other negative inflation effect. Income disparity indifferent industries, regions and different groups, in urban and rural areas, is becoming lager and lager. The Gini coefficient has exceeded the warning line.The method of compensation is used to calculate the welfare cost of inflation in china 1985-2010.Then we can estimate the social cost of inflation and the loss of Chinese residents'income. The outcome of the show since 2003, the total welfare cost of inflation accelerated rise in per capita income is also at historically high levels of compensation. This shows that economic policies must be adjusted to minimize the negative inflationary impact on the income. To improve the income level of low-income people is still the most basic measures to compensate for inflation costs. In addition, the use of macro-economic leverage, and constantly improvement of the social security system, will guarantee residents to get more rapidly and to lift the worries of life.