Income Distribution, Public Expenditure And Residents’Consumption:Theoretical And Empirical Research

China’s per capita GDP successfully break through$4000, into the middle income country in2010, economic development has made brilliant achievements, but encountered the problem of changing the mode of economic development, it is difficult to rely on the past development path. The transformation of economic development mode contains three specific contents, among them the core one is to achieve the coordination of demand structure. In recent years, by the international financial crisis, China’s export growth decline, coupled with the uncertainty of the international economic environment, The external purchasing power is not optimistic, center of gravity to achieve sustainable economic development is bound to be transferred to the domestic demand. However, our country’s reality is:the investment demand has been in surplus under the influence of various factors, consumption demand proportion is less than50%, especially private demand has lower rates. Faced with reality that overcapacity coexists with the cry piteously of low-income groups for food, China had to put the focus of expanding domestic demand in private demand. Further, effectively expanding domestic demand, increasing private demand is not only forced by the transformation of the mode of economic development situation, but also the fundamental purpose of economic development. Unfortunately, income levels of residents increase slowly, the income gap is too large and public products and services are provided unequally cause the consumption rate has been falling in china. From the perspective of governance, balancing the distribution of income is the labor-capital distribution relations adjustment and narrowing income gap on the basis of the existing production capacity unchanged, which is urgently needed to solve in short period, thirty years of reform and opening up, China has basically completed the market reform in product market, with the labor market, capital market and land market reform advancement, workers will enjoy equal opportunities for income, the labor-capital distribution relations and the income gap problem will be solved step by step. At the same time, elements market reform required more power from the public service, equalization of public services will increase investment on education, health care and training and so on, to low income groups, will enhance the quality of the nation, thus increasing the income level of residents, of course, this is a long-term process, but also to improve the social security investment, eliminate private concerns, and have also short-term effect.Therefore, firstly, this paper did a brief analysis to the evolution of our demand structure, through the analysis of international comparison and document defines primarily the unreasonable consumption rate in china. Secondly, finding the crux of the problem lies in the distribution of income and expenditure on the basis of the reality, and analyzes the conduction mechanism from two to consumption. Thirdly, establishing consumption growth rate model including the related variables, then combining with China’s actual situation proposed empirical research propositions and did empirical analysis effect of the income distribution (including the income gap and income accounts for the proportion of GDP) and public expenditure on consumption (expressed by the residents consumption rate), objective is to provide theory support and empirical evidence for expanding private demand and realize China’s demand structure adjustment through the systemic analysis.Specifically, in theory, considering unbalanced reality of our country economy development, the consumer is divided into high and low income groups in accordance with revenue, through the dynamic optimization process, at the same time absorbing two variables (the income gap and the public expenditure) to derive the consumption growth rate model. Theoretically did qualitative analysis on the income gap influence on high, low income residents consumption, and public expenditure influence on residents consumption. Conclusion:the overall performance, narrowing the income gap will promote low earners consumption, at the same time, also can inhibit high earners consumption; public expenditure play a positive role on high earners consumption, for the low earners is the opposite; public service equal degree to the above two kinds of effect played a decisive role both on quality and quantity.Based on the analysis of the mathematical model and the experience, put forward five main hypotheses for empirical research, hypothesis one, widening income gap in different stages of economic development will have different effects on the resident consumption; hypothesis two, widening income gap in different regions of China have different effects on consumption; hypothesis three, overall, all kinds of public expenditure will produce different effect on consumption; hypothesis four, before and after the reform of the tax system, all kinds of public expenditure will produce different effect on consumption; hypothesis five, before and after the people’s livelihood policy reform, public expenditure will produce different effect on consumption. Then, through econometric analysis method of empirical model established, including regression and ARMA combination model, dynamic panel model, the structural vector auto-regression model, ordered response model and state space model, to test the theoretical assumption, do the quantitative analysis of the whole process of China’s economic development since reform and opening up and income distribution and public expenditure on consumption and regional consumption before and after reform of the tax system and policy reform of people’s livelihood. The focus on effect of public expenditure on consumption, not only analyzes the effect of public expenditure on consumption, but also estimated the efficiency of public expenditure of our country during "eleven five", further analyzes the main reasons of China’s public expenditure problems. The main conclusions of the empirical study:on the whole, the income gap between urban and rural areas in China, the income gap between the industry and regional income gap have a significant negative impact on residents consumption; public investment in infrastructure, education of current expenditure and medical beneficial product public expenditure have extrusion effect on consumption, the administrative expenditure and infrastructure investment expenditure lagged one period have crowding-in effect on residents consumption, the overall effect of tax-sharing system reform policy and the reform of people’s livelihood is to inhibit the consumption; Public expenditure crowded-out the consumption of Chinese residents through inhibition of the process of urbanization.After the empirical analysis, through the impulse response function analyzed the influence of income, public spending and urbanization impact on private consumption. Finally, showing the actual balance of payments and the main source of income of China’s urban and rural residents of combined with field survey data, especially taking Shandong province and Tianjin city as an example, analyzed actual demand of low income group (mainly farmers) and transferring labor in the process of urbanization on public services (education, training, medical and pension), and gives policy recommendations according to the actual demand status.