The Effect Of The Fiscal Expenditure For The People’s Livelihood On The Household Consumption Rate

Since the1970s, the worldwide consumption share of GDP (consumption rate) has beenincreasing slowly, but in fact there is a continuous decline and rise again in these years. Especially,there is a long-term downward trend in developing countries like China, India and other highgrowth rate countries. Since carrying out reform and opening-up policy China’s consumptionrates has been declining while the savings rate has been rising, thus the lack of consumptiondemand has become an obstructive factor for china’s economy development. This paper usesmultinational sample to study the impact of the resident’s livelihood expenditure on consumer’sconsumption and savings behavior. At last we will explore the impact of the resident’s livelihoodexpenditure on consumer’s consumption effect. The specific study is divided into three parts.Part one, by using1996-2009’s international panel data of40countries, we focus on studyingthe impact of resident’s livelihood expenditure and social security expenditure consumption,based on factors that affect the consumption rate developed and developingcountries. The results show that the resident’ livelihood expenditure in developed countries isnot significant, but in developing countries which are full of uncertainties, education and healthcare expenditure is significant.Part two, by taking the impact of the debt crisis in Europe into account and using themultinational panel data of nine EU countries in1996-2009, we mainly study the impact of thegovernment’s consumption and resident’s livelihood expenditure on resident’s averageconsumption, based on factors that affect the consumption rate. The results show that the increaseof the government’s consumption rate significantly lowers residents average consumer tendency,but the medical expenditures of the resident’s livelihood and social security expenditure has asignificant positive effect on resident’s average consumption tendency, each increased by1percentage, the resident’s average consumption tendency will increase by0.31and0.37percentage respectively, but the coefficient of expenditure on education accounted for theproportion total expenditure is negative and not significant.Part three, by using the1996-2009inter-provincial panel, we study the impact of the localgovernment’s livelihood expenditure on China’s consumption rate. Empirical test results showthat increase of resident’s livelihood expenditure helps to boost resident’s consumption under thecondition of uncertain expected consumption expenditure.