The Influence Of Relative Income And Income Inequality On Urban Household Consumption Level

Since the reform and opening up,the sluggish consumption and insufficient domestic demand have always been problems that have plagued China's economic structural upgrading and sustained growth.In sharp contrast,with the development of China's economy,the income gap has become increasingly fierce.This paper believes that the current widening income gap is one of the main reasons for the sluggish consumption.China's research on the causes of low consumer consumption is full of enthusiasm,and most of the research only involves consumers' own factors,ignoring the non-independence of Chinese residents' consumption and the characteristics of cyclical consumption peaks.The existing research on income gap affecting consumption mostly uses macro-aggregate data.Based on Keynes' s absolute income hypothesis,it is believed that due to the diminishing marginal propensity to consume,income inequality leads to the accumulation of wealth to the upper layers,which leads to the average consumption propensity of the whole society.decline.This paper comprehensively considers the status of Chinese residents' consumption and the characteristics of target planning and Duesenberry 's relative income hypothesis,and decomposes the influence of the income of other families belonging to the residents to the household consumption into two opposite mechanisms: On the one hand,high-income families have a “demonstration effect” on low-income families to expand consumption;on the other hand,the expansion of the income gap has changed the household's intertemporal consumption decision-making when making targeted consumption,and raised the threshold for status consumption.This paper establishes a theoretical model of relative income and target position consumption,and derives the impact of changes in relative income and income gap on household consumption.In the empirical analysis of micro-panel data,this paper also analyzes the consumption of Chinese households by using the comprehensive relative deprivation index and the decomposition of income order and Gini coefficient.The results show that the income gap significantly inhibits household consumption,but this inhibition is offset by the demonstration effect among households,resulting in overall household consumption,and this effect is different for different age groups and income levels.The impact of families in different regions is also heterogeneous.The innovation of this paper is based on the relative income hypothesis,starting from the demonstration effect and status seeking two mechanisms to study the consumption behavior of Chinese residents,and in the empirical analysis,the first use of the relative deprivation index to analyze the consumption of urban households.