Theoretical And Empirical Research On Consumption Influencing Factors Of Zhejiang Urban Residents

Consumption, as the engine of the national economy, has always been the focus of people. China has experienced rapid economic development for 30 years, beginning to pay attention to the structural problem of the economy. Investment and export have higher contribution rate of our country’s GDP, while consumption’s impact on boosting the economy has been small. Zhejiang Province is similar to the situation of the country. Therefore, in this backdrop, studying the main influencing factors of the consumption of Zhejiang urban residents and putting forward specific policy recommendations are of significance for expanding consumption demand of Zhejiang urban residents and even national residents.According to neoclassical economics’ consumer behavior assumption, this paper selected three main factors that affect the consumption of Zhejiang urban residents, namely, income, uncertainty and liquidity constraints. Then, this paper conducted theoretical and empirical study on these three factors. Income factor, in order to distinguish income’s short-term effects and long-term effects on consumption, this paper used the Error Correction Model (ECM) to conduct empirical analysis. Uncertainty and liquidity constraints, this paper used the consumer heterogeneity assumption to divide consumers into two types:subject to liquidity constraints and not subject to liquidity constraints, thus included uncertainty and liquidity constraints in the same theoretical model, and let econometric analysis distinguish two factors. This paper used influencing factors included in the above theoretical model to build Error Correction Model (ECM), analyzing uncertainty, liquidity constraints and other factors’short-term and long-term effects on consumption. Based on the results of the above theoretical and empirical analysis, we obtained policy recommendations to expand consumption demand of Zhejiang urban residents.