Analysis Of Welfare Impacts Of Fluctuations In Prices Of Goods On The Rural Households

Since the reform and opening up, China’s agricultural and rural development fast andsignificantly enhance the overall living standards of farmers, but overall there is still a largegap compared with the city. China’s rural areas is a vast territory, household population inrural areas is still the subject of China’s population, China’s rural agricultural farmers "threerural issues" is still a major concern of the party and state leaders as well as communityexperts and scholars. In recent years, the national consumer price level continued to rise, theprice increases tend to cause a decline in living standards and the level of benefits. Undernormal circumstances, the relatively high-income families of low-income families are morevulnerable to price fluctuations. Then, the different income levels of families face the sameprice fluctuations, the level of their welfare will be how to change? Affected the degree ofhow? If you want to compensate for the residents, not affected their lives, and how tocompensate? In this paper, the AIDS model and compensation variables were chosen to solvethese issues.In this paper, according to the division standard of the China statistical yearbook, theincome level of residents will be divided into high income, higher income, middle income andlower income and low income, and consumer goods include food, clothing, housing, familyequipment supplies and services, medical care, transportation, communications and culturaland educational entertainment. The article first introduces the characteristics of fluctuations inthe price of consumer goods in China since reform and opening up, its influence on the ruralresidents, and then use the AIDS model on consumption in the rural residents in China in1995-2009statistical data analysis, estimate the expenditure elasticity of different incomelevel of resident and Marshall demand elasticity, and variable compensation method is used toestimated the impact of its welfare and analysis the difference.Through analysis and research, we can draw the following conclusions:（1）consumergoods price fluctuations impact on rural residents’ consumer spending because of thedifferences between the different categories of consumer goods. Expenditure elasticity of food, medical insurance, household is less than1, the price not much impact on the rural residentsof consumer spending; expenditure elasticity of clothes and transport communications classconsumer is close to1, the price fluctuations on the rural residents’ consumption spending theinfluence on the number of relatively stable; expenditure elasticity of living, cultural andeducational entertainment consumption is greater than1, the increase of rural residentsincome of such large effect on consumer spending.（2）consumer goods price fluctuationsaffect rural residents welfare are associated with the income level of rural households. Thehigher the income level of rural residents, the affected by fluctuations in the price ofconsumer goods is smaller, thus compensation to the families of different incomes havedeclined with the increase of income.（3）the welfare measure of second order extendedeliminates the alternative impact on consumption, compared with the first-order estimatingresult extension, a second order extended estimation results is better.