The Influence Of The Social Security On Residents’ Consumption

Since2007, due to the impact of the global financial crisis, China’s economic growth is obviously slowing down. The GDP growth in2012is only7.7%, the lowest point since2000. Deterioration in the external economic caused a substantial negative effect on exports. In2009, the total exports of goods decreased by18.3%compared to2008.The contribution of exports to GDP growth rates are basically negative from2009on. Exports are more vulnerable to external economic, so in order to maintain a healthy and stable development of the national economy, we should do more work on the expansion of domestic demand. But the numbers can show that China has high levels of investment, which is also widely criticized. Based on the factors above, the expansion of domestic demand has mainly turned to increasing household consumption. Since the1990s, although China’s economy has maintained sustained growth, but the contribution of consumption has been declining; the final consumption rate in2012was49.5%, well below the world average level.Currently, expanding consumer spending becomes an urgent problem to be solved; on the other hand, the construction of the social security system in recent years has drawn lots of attention. Many scholars seek ways to expand consumers spending, establish and improve a proper social security system is an important one.The main idea of this study is the impact of social security on household consumption. Research shows that social security, on the one hand, can weaken people’s uncertainty about the future, and then change the consumption propensity; on the other hand, social security can obviously redistribute the income between people, therefore narrow the income gap among people. The research shows that the changes of income gap can change the average consumption propensity of the overall society. This paper will consider the effect that social security has on household consumption as a dynamic process. First, Social Security is expected to change the uncertainty of the residents and then directly promote or inhibit consumption. Secondly, social security can affect the income gap through income redistribution, and the income gap is an important factor in consumption amount. Therefore, this paper believes that there is a chain-link between social security, income gap and the household consumption. In this process, the income gap plays the role of intermediary variables.This article decomposes the effect of social security has on household consumption into intermediate effect and direct effect. Intermediate effect is the effect of social security has on household consumption through the income gap. On this basis, if the income gap between residents is being controlled, then the effect social security has on household consumption is direct effect.Within the framework above, this paper first find out the mechanism of intermediate effect and direct effect. The results showed the chain-link between social security, income gap and the household consumption works. After that, the paper selects and processes data in2001to2011, the provincial panel data of the country’s31provinces. And then establish a set of three dynamic panel models to do empirical research. Two-step system GMM estimation method is used to estimate parameters.The empirical results show that the increase in social security can significantly promote the consumption, increase in social security can significantly narrow the income gap between urban and rural residents, the expansion of urban-rural income gap can significantly reduce household consumption, intermediate effect and direct effects are both significant. From the results, the proportion of the mediating effect in the total effect is17.6%. As for the direct effect, the number is80.8%.Finally, based on the results of empirical analysis, we make some policy recommendations on how to use the social security to promote household consumption, by its function of narrowing down income gap.This article is divided into five chapters, the first chapter is an introduction, the second chapter to chapter IV is the main part, and the fifth chapter is the conclusion. This paper has the following characteristics and possible innovations.This paper is the first attempt trying to consider the effect of social security has on household consumption as a dynamic process. For the first time, this article decomposes the effect of social security has on household consumption into intermediate effect and direct effect.Second, previous studies mainly use time series data or cross-sectional, this paper will use the provincial panel data for empirical research. On the one hand, an increase in the degree of freedom can improve the accuracy of the study; on the other hand, the cross-sectional and time series existence can provide more useful information.Third, empirical study involving multiple variables, in order to reflect the relationship between variables, the paper constructed as a set of three regression equations.Fourth, most existing studies did not contain the lagged dependent variable as an independent variable; this paper makes up for this deficiency.