Urban And Rural Binary Structure And Regional Differences Of Chinese Household Habit Formation

Characteristic of household consumption will reveal the urban&rural binary structure and regional gradient development pattern from east to west of the economy, so that consumption between urban and rural and three regions will present different characteristics. From such a reality in the current economic development, this paper is drawing on both the relevant economic theory and the domestic&international research results, then study on the differences of consumption habit formation in urban&rural and three regions, the result can reveal some important facts of many policies.Firstly, with a more complete logic line and based on the brief introduction to the classical theory of consumption, I made comments of their evolutionary process to find the intrinsic association of habit formation theory and classical theory, so that we can mine the advantages of habit formation theory compared to other theories, and construct related model on this basis. With reference to Dynan’s life cycle consumption model with habit formation, and through a series of mathematical deduction we are able to obtain the habit formation model which can reveal the characteristics of the residents. In the empirical part, on the one hand, as the habit formation parameter in this model is fixed, the time-varying characteristics can not be reflected, so we can not inspect the dynamic path of habit formation. In the view of this, this paper combines with state-space model to solve the habit formation parameters of urban&rural residents at each time point. The empirical results reveal that there are significant differences of the paths of habit formation between urban and rural residents:variation in rural residents’habit formation is progressive and slight, while the variation in urban residents’is revolutionary, which reflects the rapid conversion feature of consumption hot spots. Meanwhile, the smooth changes of habit formation parameters in urban and rural areas over the past decade shows that, in the current consumption structure, economic and policy changes and new consumption patterns are required to break the formed habits. On the other hand, in the view of the out-sync of eastern, central and western economic development, and with reference to the paths of habit formation at different times, this paper use panel data model to solve the habit formation parameters of eastern, central and western residents by two periods. The result shows that the parameters are gradually decreasing from the eastern region to the west, and the habit formation parameters of urban and rural areas in the three areas are different. The results indicate that the level of economy development, current and expected income, as well as the marketization are all correlated with consume habit formation.