A Research On Urbanization’s Expansion Effects To Domestic Demand Of Zhejiang Province

The development of Urbanization has a great impact on people’s consumption and in optimizing the industrial structure, reducing the overcapacity and promoting the development of the third industry. It plays a crucial role in expanding domestic demand and stimulating economic growth. Zhejiang province, as one of the most developed provinces in china, has a great reliance on export. A lot of private-run enterprises in Zhejiang which make profits on the basic of low cost have met with great challenges after the global financial crisis, many of them bankrupted because of the reduction of the demand. We can see from that export can’t be the motivation of Zhejiang’s sustainable economic development, Zhejiang’s economic development should seek a new force in stimulating the domestic demand and promoting the economic growth, that’s urbanization.Researching on urbanization’s promotion to domestic demand has a great meaning to the development of Zhejiang’s urbanization and in choosing an appropriate way for Zhejiang’s urbanization. The paper firstly analyzes the mechanism of action from urbanization to domestic demand on a basis of theory reviewing, then it has a statistical analysis on Zhejiang’s investment, consumption, and total domestic demand under different level of urbanization. Later on, it uses econometric methods to measure the expansion effects of urbanization to domestic demand (also investment and consumption respectively), and finally gives some suggestions on Zhejiang’s urbanization according to the results of the econometric tests.The empirical research shows:firstly, there’s a long-term cointegration relationship respectively between urbanization and investment, consumption, one percent increase of urbanization will bring four point seventeen percent increase of investment and two point thirty-three percent increase of consumption; Secondly, the Granger Test shows that urbanization is the reason for the increase of domestic demand which conform to the methods of this paper; Thirdly, the Impulse Test shows that urbanization has a greater impact on investment than consumption, the expansion of consumption has a delay effect; Fourthly, one percent increase of urbanization will bring three point thirty-seven percent increase of total domestic demand, but it has a delay on expansion currently due to the delay effect of the expansion of consumption. According to the results of these econometric tests, the reason why urbanization has a greater impact on investment than consumption lies in the transformation time-lag of people’s consumption habit, the delay of perfection of social security system and consumption inhibits coming from the high housing prices and income transformation. The Paper infers that the key factor to maximize the expansion effect from urbanization to domestic demand is to deduce the expansion delay effect of consumption, also we should keep on improving the urbanization, and at the same time, advice a higher quality of urbanization.