Study On The Effects Of Social Security On Residents’ Consumption Demand

Ever since2008, the world economy has suffered the most severe economicrecession and economic crisis swiftly swept across the whole world. Most of thedeveloped economies have entered the stage of economic depression, and the economicdevelopment of other economies also began to slow down sharply. Against the backdropof financial crisis, the domestic demand of China has become the driving force forpushing the development of economy and consumption of residents constitutes animportant part of stimulating domestic demand. According to analysis of the currenteconomic development situation, China can only promote its economic growth throughexpanding domestic demand. However, since the social security of China at the momentis still at the stage of accelerating construction pace and is relatively incomplete, mostresidents reduce their consumption and increase their savings in the banks asprecautions against uncertain factors like retirement and medical treatment, etc., whichhave had great impact on the consumption of residents in China.To effectively expand the consumption demand of residents in China, this paperconducts an analysis into the effects of social security on residents’ consumptionthrough qualitative and quantitative analysis approaches. The findings of the analysisreveal that social security and residents’ consumption are positively co-related with eachother and that promoting the building of social security system can stimulate theconsumption of residents in China. That’s why this paper introduces Keynes’s ExpectedConsumption Theory as the theoretical framework of the present study, with the currentconsumption situation of residents in China and various influencing factors as studyingsubjects, describes the influences of social security and consumption through qualitativeapproach and conducts quantitative analysis based on relevant sequential data.Therefore, this paper elaborates its main point in four parts.Part One elucidates research of scholars from home and abroad in the relevantfields in recent years and makes a review and summary on related bibliography, makingclear the outline and major points of the whole paper.Part Two analyzes the current situation of consumption in China and the reasons byillustrating through the analysis into consumption structure and hierarchy ofconsumption. Expanding domestic demand and increasing people’s consumption isactually trying to improve people’s living standard and it concerns people’s livelihood and well-being. This part places an emphasis on the function of social security to reduceresidents’ precautionary savings and increase their consumption.Part Three, starting with the current economic situation of China, adoptsappropriate economic theory as the basis of the study and studies the relativity betweensocial security and residents’ consumption with regression model. The regression modelis constructed with the data on retirement and medical security of residents in towns andcities of China from the year1996to2011, the expenditure of retirement fund andmedical insurance as independent variable and the expenditure of consumption ofresidents in towns and cities as dependent variable. Then it elaborates the necessity ofperfecting social security to expand domestic demand with theoretical and empiricalanalysis combined.The fourth part, on the basis of the analysis of the above parts, puts forward thesuggestions for promoting residents’ consumption and expanding domestic demandsuch as increasing residents’ income and changing their consumption concepts; furtherexpanding the coverage of social security and increasing residents’ immediateconsumption; perfecting the consumption functions of social security cards to increaseresidents’ consumption and promoting consumption by making full use of socialsecurity fund. Meanwhile, it is also advised that service industries that are related tosocial security should be developed to improve residents’ quality of lives, and that thefiscal function of local governments should be fully fulfilled to promote thedevelopment of consumption markets in rural areas.