Incomes Of Urban And Rural Residents And The Upgrade Of Consumption Structure

Since the Reform and Opening-up, China’s economy has maintained a rapid growth. But, the emphasis on speed of economic growth and the impact of the dual economic structure between urban and rural areas make the income gap gradually widening. It makes the rate of final consumption, especially China’s consumption rate too low. Not only hinder the consumer’s role in promoting national economic development, It also weakened the ability of the Chinese economy to withstand the risk of international economic fluctuations. In the global financial crisis which broke out in the end of2007, the mechanism of China’s economic growth has also undergone a significant change. Historical experience shows that long-term stability of a country’s economy growth is largely dependent on the growth of the consumption. So, research of the lack in consumers’ demand and upgrade the consumption structure, has a very important practical significance to the protection of the national economy health.In economic theories, academic debates on consumption from different perspectives never ends. Given the dominant position of household consumption in the whole social consumption, this thesis lays the research angle on household consumption around urban and rural residents in China with domestic income gap as the starting point. This thesis first analyzes current situation and causes of the income gap in China, and also introduces the influence on consumption caused by income gap. Then, this thesis divides China as three areas, high-income, middle-income and low-income areas respectively. On the basis of that, this thesis analyzes the consumption among both urban areas and rural areas and launches empirical studies on the total amount of consumption and its structure in China. For empirical studies, this thesis uses provincial-level panel data in China. In light of relevant literature, this thesis calculates permanent income level for model building and adopts the system GMM method for empirical test. According to the studies above, this paper concludes the influence degree value caused by factors like consuming habits, permanent income, the total dependency ratio, the credit variable, the government expenditure on people’s livelihood, towards the total consumption and the structure. In the end, this thesis summarizes the whole study and gives appropriate policy recommendations.