An Empirical Analysis Of Chinese Consumption Function Under Influence Of Wealth Effect

With the rapid development of national economy and political economic system andbased on the household consumption rate has been at a very low level in the internationalin recent years, even negative growth phenomenon, the consumer problem is highlyconcerned by the government and economists. Through the study of consumption functionunder the influence of wealth effect in China, this paper explains the consumption behaviorof residents in our country at present. Wealth effect refers to the wealth effect onconsumption in addition to the resident income. Consumption function is a mathematicalexpression to describe consumer behavior. Firstly, the paper sums up the classicalconsumption theory, the applicability and limitation of application in China which providesa solid theoretical foundation for this research, and apply the theory model for empiricalresearch. Considering comprehensiveness and operability principles, the collection of thesavings, stock assets and bonds represents financial assets index. Housing assets representreal wealth index. Finally, according to the panel data of2000-2010and31provinces andthe method of FGLS, get the four regions’ wealth effects. We find our marginal propensityto consume, the wealth effect of financial assets and housing wealth effect. The results isfrom the empirical comparison of horizontal and vertical, and explain the consumption inour country and the existing problems, and put forward feasible and effective policyrecommendations for different regions.Through empirical research, the main conclusions are: first, the main source ofconsumption is still income, especially in the underdeveloped area, stability and increasethe income of residents is the key to the growth of the national economy to stimulateconsumption. Second, the financial assets wealth effect is relatively weak, and from theeast to the west gradually weakened. It is particularly important for stimulatingconsumption, financial market healthy and stable development and investors’ rationalinvestment ideas. Third, real estate market wealth effect on consumption has two sides. Itstimulates consumption in the economically developed areas, but there is a negative effectfor the undeveloped area. Therefore, the construction of stable incomes, affordable housingand the construction of affordable housing systems should strengthen the policy.