Life-Cycle Hypothesis And China Citizens’ Behavior In Consumption And Saving

How to promote the level of consumption and improve the contribution of consumption to national economic growth rate in China,are always being a great concern of our government.But the contribution in China is still low compared with many developed countries until now.At the same time,along with the disappearance of the demographic dividend,the trend of population aging is becoming more and more highly and can not be reversed.So,in the new age structure of the population,how to promote the level of consumption in China will be faced with some new problem and new difficulties.Therefore,the analysis of behavior in consumption and saving of Chinese residents with different age from the view of life-cycle is a very important and meaningful work.On the one hand,it helps us to find the phenomenon of “low consumption” and “high saving rate” are mainly due to what age people in China,on the other hand,it can also helps to predict the evolution law or trend of total consumption in the process of aging in China,and in the light of its general trend,we can put forward corresponding countermeasures early.The dissertation are mainly contains following parts.Firstly,using the data from Chinese Household Income Project,this paper analyzes the distribution tracks and its changes of consumption in the life cycle of Chinese residents.We fins that there is a typical “hump” distribution of consumption in 1995,but the “hump” is not obvious any more in 2002 and also the difference in consumption among the different age persons does not significantly.Along with the age growth,the consumption is becoming a clear monotonic decreasing in the life cycle in 2007,that is to say,the consumption in middle age people is low than in the young,and the consumption in old age people is low than in the middle.The paper reveals that it is the middle and old age people that lead to the consumption in China is so low.So,this paper gives an explanation from the views of income,family size,labor market risk and health risk,etc,and finds that the key to explain the distribution model of consumption lies in the income and its distribution in the life cycle in China.That is to say,compared with the young family,the middle and old family whose income is relatively low is the main reason to explain the phenomenon of low consumption in China.Therefore,how to improve the income especially the income in the middle and old family is the key to promote consumption in China in the future.Secondly,to reveal whether it is “retirement” which lead to the decline of consumption in old family,Using a Regression Discontinuity Approach,this paper identify the causal effect of the Chinese male’s retirement in current system on its household consumption based on the data of Chinese Household Income Project Series(CHIPS)(1995、2002、2007).The results shows that there are no significant effect on the expenditure of food and durable goods,while exists significant effect on the expenditure of cloth and total consumption to the retirement of male.At the same time,there are no significant effect on the expenditure of cloth and durable goods and total consumption,while exists significant effect on the expenditure of food to the retirement of women.And this article explains the reasons above from the view of the design of retirement system,the allocation of home time,the roles difference and the order difference in gender among the family in China.Thirdly,the problem of consumption and saving is the same one,in order to explain the phenomenon “low consumption” in China,we can explain the “high saving rate” in another angle.Using Chinese Household Income Project Series(CHIPS)data in 1995 and 2002 and 2007,this paper tests if the life cycle/permanent income hypothesis exists in China from saving rate.The results show that China’s urban household’s savings rate has a "U" type distribution in their life cycle,both in 1995 and in 2002.However,the "U" type disappear in 2007 and there is no difference in lifecycle saving among the different age household.This result shows that the action of China’s urban household’s savings do not consistent with the life cycle/permanent income hypothesis.Comparative analysis shows that the reason is different that causing China’s urban household savings rate in 1995 and in 2002 and in 2007.From the view of education and health care and pensions and housing,this paper reveals that a number of institutional reforms in China causing the different impact to different age stage household or different periods household.Accordingly,this paper explains the reason that Chinese urban household’s saving rate in life cycle is "U" type and its differences in different periods.Fourth,to explain the phenomenon “high saving rate” in old age family,this paper also gives an interpretation from the growth of average life expectancy,i.e.the falling of the mortality in life cycle in China.The paper shows that Life expectancy growth improves the steady-state savings,and age structure change affects individual saving behavior too.The empirical analysis revealed that the increase of child population rates reduces national saving rate and the increase of old population rates improves national saving rate when we do not considering time effect,while the increase of child population rates improves national saving rate and the increase of old population rates reduces national saving rate when we considering time effect.The paper gives a reasonable explanation on this conclusion.Through using a variety of estimation method and increasing a lot of related variable,we find that the conclusion we obtain in this paper is robust.Fifth,it is firstly be put forward that to build a long-term effective mechanism to promote the growth of consumption in the “Twelfth Five Year Plan” in China.Using the times series data between 1999 and 2012,this paper analysis the impact of permanent shock and transitory shock on the volatility of consumption,assets and income in China based on the method of permanent-transitory decomposition in random shock,The paper finds that the permanent shocks can be used to explain completely the volatility of consumption,income and asset in China in the long run,and in the short term(1-2months),the transitory shocks can explain the volatility share about 30%-70% in consumption,but it can only explain the share no more than 10% in asset and income.The paper shows that the long-term consumption growth is results from the rapid growth of income and assets,but in the short term,the growth of income and assets have little effects on the consumption in China.To construct a long-term mechanism which can be used to promote the growth of consumption in China,this paper suggest that we need to improve consumption environment and consumer expectation,to eliminate all kinds of external factors which cause consumption volatility in the short time,but in the long run,we need to improve fundamentally the level of asset values and income in household.In addition,this paper also provides a special perspective for the explanation of consumption volatility is greater than the output volatility in China.The analysis above show that,the phenomenon of “low consumption” in China is mainly due to the middle and old family,and the phenomenon of “high saving rate” is mainly due to the young and old family in China.Therefore,to promote the level of consumption in China and improve the contribution of consumption to national economic growth rate,the paper puts forward several corresponding countermeasures and point out the possible research direction in the future.