The Research On Effects Of China’s And Social Security And Urban-rural Income Gap On Peasants’ Consumption

Since the reform and openness, Chinese life level and life quality have got a verybig enhancement. Due to the existence and development of urban and rural dualeconomic system, urban and rural economic unbalanced development in urban andrural residents widening income gap trend. Our country has stepped into the largestincome gap of urban and rural over the world. The social security system as aregulator of the income distribution has been set up and developed after the foundingof new China. However, china’s social security level is still not high, Social securitycoverage is narrow, and the social security system has obvious differences betweenurban and rural areas and so on. Many scholars in our country studied the relationshipof social security and residents’ consumption, conclusion is very different, so thefurther study of the social security is urgency and necessity.The social security system through the income distribution effects promote socialjustice, the big difference of social security level will further improve the invisibleincome of urban residents, relatively reduce the farmers’ income level, and then affectconsumer spending. The enlargement of income gap between urban and rural areaswill restrict the positive role of social security on residents’ consumption. Combingresearch of social security and urban and rural residents’ income gap is helpful forpolicy makers to make the most conducive to economic development and improvepeople’s welfare policy choices.First of all, this paper is based on the urban and rural income distribution situationof our country, using Keynes’s theory of the law of diminishing marginal propensity to consume and the precautionary savings theory and so on to comprehensive analysisof urban and rural income gap of residents’ consumption of our country. The second,this paper is based on improvement of inter-temporal substitution model ofgovernment spending and private consumption, from the angle of mathematicalanalysis proves that the social security and the uncertain relationship betweenresidents’ consumption, and the asset substitution effect of social security andretirement effect theory, combined with the status quo of the social security system inour country to comprehensive evaluation of the social security of the dual effect ofresidents’ consumption in China. Finally, based on social security and the interactionof the income gap between urban and rural areas, this paper considers the interactionof the social security and urban and rural residents income gap of residents in ourcountry the influence of the consumption for the first time, combing social securityand urban and rural residents income gap to research, and discusses the narrowing theincome gap and social security work together to expand the influence of residents’consumption theoretically.This paper use1989-2011time series data to establish the VAR model, through theunit root test, co-integration theory, empirical analysis, impulse response function andvariance decomposition technology to examine the effects of urban-rural income gap,social security expenditure and their interaction on consumption, and make economicexplanation on the empirical results. The results show that the logarithm of per capitaspending on social security for each unit increase, our residents’ consumption ratewill rise0.276, and prove that improving the level of social security can improve theresidents’ consumption. Income gap between urban and rural areas is increased by oneunit, our country residents’ consumption rate fell by0.033units. The interactionbetween social security and urban-rural income gap restrain residents’ consumption, and shows that the income gap between urban and rural areas have curbed the role ofsocial security on residents’ consumption. The logarithm of per capita income isincreased by one unit, the rate of consumer in China will decrease0.127units, thisindicates that China’s income level is low, and the income growth is very slow.The first chapter is introduction. This chapter mainly elaborates researchbackground and significance, and reviews the income gap and social security both athome and abroad on the impact of on residents’ consumption related literature.The second chapter studies the function mechanism of social security on residents’consumption. Firstly study the present situation of the social security system, and thenanalysis of the social security for residents’ consumption level of positive affect andnegative affect.The third chapter studies specific way of the influence of urban-rural income gapon residents’ consumption. Firstly describes the present situation of urban and ruralincome gap through affecting consumption tendency to influence the consumption ofresidents, and analyzes the negative effects of income gap on consumption.The fourth chapter studies the interaction of the social security and income gapbetween urban and rural areas. The difference of urban and rural social securitysystem will further widening gap between urban and rural areas, and the enlargementof income gap between urban and rural areas will affect the social security level.The fifth chapter is the empirical analysis part. Firstly introduces the use ofresearch methods and theoretical models. According to our country related time seriesdata from1989to2011, establish the VAR model, through the cointegration test,variance decomposition and impulse response function to study the affect of urbanand rural residents income gap, social security expenditure and their interaction onChina’s consumption, and make economics to explain the empirical results. The last part is conclusion. In view of the above empirical analysis, separately toour country current social security system and the income gap between urban andrural areas put forward policy Suggestions.According to the empirical research conclusion of this paper, narrowing the incomegap between urban and rural areas, improving the level of social security in the ruralareas to establish perfect social security system, and improving the level of income isthe basic way to improve the level of residents’ consumption in China.