Social Security In Rural Areas, Farmers' Consumption Affect The Empirical Analysis

The insufficient consumption of rural residents has become a bottleneck restricting China to expand domestic demand. In this paper, we study the mechanism on the impact of rural social security to farmers' consumption through theoretical overview and establish an empirical function of rural residents' consumption to analyze the impact of rural social security.Firstly, we summarize the impact of social security on consumer behavior through the existing literature home and abroad. Secondly, we analyze the mechanism of rural social security on farmers' consumption through three theories: the effect of social security to income distribution, the effect of social security to reducing precautionary savings and the effect of social security to reducing life-cycle saving for old age. Thirdly, we give the status quo of Chinese domestic demand, consumption of rural residents and rural social security by questionnaire. Then we select the time-series data (1982-2008) to analyze the relationship of rural social security and farmers' consumption by using the empirical model: co-integration test model and vector error correction model (VECM). We find that social security plays a weak promotion role in farmers' consumption in the long term. In the short term, the increase of social security input have not promote the increase in consumption expenditure of rural residents, but decrease, and the above-mentioned long-term co-integration relationship have some inhibitory effect to increasing the consumption.Therefore, we need to strengthen the building of rural social security to change the disadvantaged position in farmers' income distribution, so that the farmers shall share the fruits of economic development early, and rural social security promotes farmers' consumption stability. In the end of this paper we give some advice to strengthen the building of rural social security: strengthening the rural social security legislation, defining the government responsibility, strengthening the social welfare, enhancing the value of the fund and establishing the convergence relation of rural insurance with the city system.