The Influence Of Pension Insurance Payment On Urban Household Consumption

In nearly ten years, China is mainly driven by investment, import and export to stimulate economic growth.However, consumption, particularly the residential consumption’s contribution to the economic growth goes way down, which is far below the level of the developed countries. According to the previous research, the imperfect pension insurance system in our country could explain the lack of urban household consumption to some extent. Based on the life cycle model in the paper written by Mr.Bai“The Impact of China’s Pension Insurance Payment on Consumption and Saving”,the paper uses the cross-sectional data of 25 provinces in 2010 and 2012 in China Family Panel Studies(CFPS).Using data for 2010 and 2012 to establish the micro panel and the individual random effects model, to analyze the impact of current pension insurance payment on the urban household consumption behavior from the perspective of the pension payment burden. The paper is based on " dual pension scheme " to study the following two aspects: one is the overall impact of pension insurance payment on urban residents consumption, the other is the impact of pension insurance payment on different income of urban household consumption.Empirical study found that: firstly, the pension insurance payment has inhibitory effect on the urban household consumption. Pension insurance payment makes worker labor remuneration be a part of social security contributions and reduces household disposable income. And at the same time, the imperfection of personal credit market in China leads to families face liquidity constraints which eventually reduces consumption.Secondly, the pension insurance payment leaves different influence on different per capita income of household consumption. The higher the family income per capita, the smaller the inhibition of urban household consumption.Thirdly, as a result of the existence of “dual pension scheme”, the impact of each family’s consumption affected by the pension insurance payment is different. The difference of system makes the retirees from public sectors enjoy more favorable pension insurance system and more stable payment balance than the retirees from private sectors. Therefore, the enterprise workers are more cautious than personnel in government institutions in respect to consumption. Lastly, the impact of pension insurance payment on the urban household consumption will also be affected by other factors. Detailed outcomes are as below: the larger the family size, the less the household consumption. And the more children underthe age of 16 or the aged more than 60 in the family, the less the household consumption.The household consumption of a college or above family is higher than a high school degree family.Also, the higher the social status of the head of a household, the smaller influence of family pension insurance payment.The empirical result of this paper provides a micro-level explanation for the declining of China urban household consumption in recent years: the imperfect pension insurance system in China makes urban households reduce the current consumption level and increase the savings.