The Empirical Research Of China Income Distribution’s Effect On Residents’ Consumption

Income distribution and consumption demand are two very important problems in the processof economic development. In recent years, our county’s economy appears growth miracle,inadequate residents’ consumption and income distribution gap problems also arise at the same time,these two problems draw wide attention from the general public. This paper first points out themechanism of how the income distribution influences consumption in our country, then analyses thecurrent situations of China’s income distribution and the consumption of the residents. When wehave a rough idea about income distribution and the consumption of the residents, we chooserelated data from1997to2011about China’s urban and rural in24provinces to establish the paneldata model about the influence of income distribution to residents’ consumption in our country. Themodel establishes on the basis of considering people’s behavior, we use this model to conduct aempirical analysis of how the income distribution gap and consumer bandwagon behavior influenceurban and rural residents’ consumption. The results of the study show that, for urban residents’consumption, the greatest impact factor is income, followed by the income distribution gap andresidents’ bandwagon behavior; the greatest factor of impacting rural residents’ consumption isbandwagon behavior, and we make a further explanation for these phenomena. When we make acomparison between the study of urban and rural areas, we find that income distribution gap canreduce consumption no matter for urban residents or rural residents. What’s more, rural residentshave more obvious bandwagon behavior than urban residents. Finally, we put forward somecorresponding countermeasures according to the estimated results of the panel data model.