Social security, as one important way to promote residents’consumption, has being put high emphasis since financial crisis. There is no denying that social security plays an important role in economic and social development. With years of exploration and practice, Jiangsu province has developed social security system, which includes social insurance, social relief, social benefit, preferential treatment and mutual aid.The effects of social security on residents’consumption are a complicated but important study. China is in the key process of social security reform. So it is vital to study the effects of social security on residents’consumption for the development of social security reform, as well as the promotion of residents’consumption.The article provides a brief summary of relate literature and analyzes the effects of social security re-distribution and Consumer behavior theory. The empirical study is based on a sample time-series from1990to2009. The article shows aggregate and structural changes of the variables at first, and then establishes error correction model (ECM) under life-cycle model and permanent income hypothesis.The estimation result shows that social security has little impact on residents’ consumption since1990. It even decreases residents’consumption. But in short term, it almost has no effects on residents’consumption.There are several reasons for the result. Most of them are institutional reasons; through part of them are consumer behavior reasons. The institutional reasons include: Initial distribution, price of basic public goods such as education, medical and housing, reverse redistribution effect of social security, liquidity constraints of financial market. Other reasons include:Chinese traditional consuming habit of frugal living has no fundamental change since open reform.In order to promote the coordinated development of social security and consumption, the article gives some policy recommendations. First of all, promote income distribution and monopoly industry reform as soon as possible. Increase lower middle class income and decrease income gap between rich and poor. Second, put more emphasis on supply of basic public good by government and decrease residents’ precautionary saving. Third, establish robust social security system and adjust the range and direction of expenditure to correct reverse redistribution effect. Forth, establish robust financial market system to decrease liquidity constraints. Fifth, advocate moderate consumption and pay more attention to quality of life. |