The Wealth Effect Of Rising House Price On The Residents' Consumption

Based on the existing research literature and the consumption function theory,this paper argues that it is appropriate to employ the LC-PIH model to analyze the impact of house price on urban residents' consumption.And then this paper analyzes the specific mechanism of the impact of housing prices on the residents' consumption:Housing price through the way of "unrealized wealth effect"?"realized wealth effect"?"liquidity constraints" and "positive confidence effects" to promote the consumption of residents after the price zoomed up;And by the effects of "budget constraint" and "crowding-out effect",house price restrains consumption.After that,the empirical model that is derived from LC-PIH model is used to analyze the impact of Fujian's increasing house price on the residents' consumption who come from different income levels groups or from different cities in Fujian Province.It turns out that:from the perspective of different income levels groups,positive wealth effect and negative wealth effect of housing prices is exist for high-income groups and low-income group that are located in both ends of the income distribution;From the perspective of different cities in Fujian Province,the rising prices will both bring the positive wealth effect and negative wealth effect to the consumption,which is difficult to distinguish,as a result most of the cities in Fujian did not show significant wealth effect.It turns out that the housing price of Xiamen city,where economic is developed and per capita disposable income is high,showed a significant positive wealth effect;and Ningde city with lower per capita disposable income showed a significant negative wealth effect.Finally,based on the empirical results,this paper gives some relevant suggestions.