Income Inequality And Household Consumption Rate

The global economic indicator of GDP growth showed a trend of upward development of the world economy in 2017,but the global economy still faces problems such as inequality,trade disputes and financial pressures.Household consumption rate as the largest and most stable contribution to the world economy has been confirmed by the existing literature to be affected by income inequality.For China,in the current complicated international background,China's economic transformation and upgrading needs to play a supporting role of consumption in the economy,especially the household consumption rate.Therefore,using the latest data to study the impact of income inequality on household consumption rate plays an important role in the sustainable development of the world economy,especially the Chinese economy.This paper first reviews the relevant literature and finds that the widening income gap means that the income of the rich is relatively increased,and the proportion of income is rising.Based on the law of diminishing marginal propensity to consume,this part of the rich will increase its savings rate,thereby reducing the overall household consumption rate;On the other hand,the expansion of income inequality to a certain extent will stimulate residents' desire for consumption,and low-income groups that are subject to liquidity constraints but have no credit constraints may borrow to consume,which is conducive to the improvement of household consumption,but the excessive income gap is not conducive to the operation of this mechanism.So is there a non-linear relationship between income inequality and household consumption rate?Therefore,this paper first analyzes the status quo,trends and causes of the income inequality and the household consumption rate in the world from the empirical facts,and analyzes the status quo of China in detail.Then use the data of 151 countries from 1960 to 2017 to construct a dynamic unbalanced panel data model,and use the system GMM estimation method to conduct empirical research.The main conclusions are as follows: In general,income inequality and household consumption rate are in a “U” relationship.This relationship is also true in developing countries.This shows that if the income gap within the country is within a reasonable level,it will be conducive to the growth of household consumption rate,and if the income gap exceeds this level,it is not conducive to increasing the average consumption propensity of residents;In the subsample of developed countries,credit expansion will significantly improve household consumption rates,while the direction of action in developing countries is negative and not significant.This shows that the expansion of credit can only ease the mobility restriction of residents and increase the consumption rate of residents through the increase of financial availability in developed countries;The consumption rate of the countries of Confucian cultural circle is significantly lower than that of nonConfucian cultural circles,and The positive effect of income inequality on the consumption rate of residents in the Confucian cultural circle is significantly lower than that in the non-Confucian cultural circle;Economic growth and credit expansion can promote the positive relationship between income inequality and household consumption rate to a certain extent;The guarantee of people's livelihood fiscal expenditure and the reduction of national system uncertainty will make income inequality to a certain extent without affecting residents' consumption reduction due to concerns about uncertain spending.