The Effects Of Public Expenditure On Residential Consumption

Recently, the scale of Chinese government’s public expenditure has been expanded continuously, and keeps breaking historical records. However, the contribution of residential consumption to economic development falls constantly. As a result, the influence of public policies on residential consumption has become the focus of discussion.This paper firstly illustrates the latest research progresses on residential consumption. Then, this paper thoroughly analyzes the relationshipsamong China’spublic expenditures, consumption habits, uncertainty and residential consumptions in the light of both theoretical and empirical perspective. In the empirical analysis part, this paper studies the influences based on GMM model. It comes to the following conclusions: there exists a large inertia in consumer behavior of Chinese residents. The uncertainty Chinese residents faces significantly reduces residential consumption. On the research of the impact of public expenditure on consumer’s behavior, the overall public expenditure can boost residential consumption. In the meantime, different public expenditure could have diverse effects on residential consumption. Expenditure for education and expenditure for social security would have crowding-in effect on residential consumptions. Improvementof infrastructure status can also boost residential consumption, while the effect is relatively small. While the effects of expenditure for agriculture is not significant.Because individual characteristics are overlooked in the macro level, while individual is the subject of consumer behavior, it is necessary to consider this problem in a micro level. Thusthis paper does an in-depth research on the microeconomic effect of public expenditure on residential consumption taking medical insurance as an example with the CHNS database. It comes to the following conclusion:the effects of different medical insurance on household consumption vary a lot. Forinstance, the household with a high coverage of the new cooperative medical insurance in rural is more likely to buy refrigerator, color TV,washing machine or computer. But the household with a high coverage of urban basic medical insurance is prone to buy camera or VCRs.This paper can provide a reference for the problem of the low consumption in China, which has some practical significance.