Impact Of Economic Growth For Rural And Urban Resident Consumption And Government Consumption In China

This paper examines impact of economic growth for rural and urban resident consumption and government consumption in China since Reform and Opening. Because of distinctive dualistic economic structure, the consumption between urban and rural residents are very different.Thus, when studying the relationship between consumption and economic growth in China, urban and rural areas should be distinguished. Totally, consumption in China can be divided into three parts:urban resident consumption,rural resident consumption and government consumption expenditure. The impact of urban and rural resident consumption of China and government consumption on economic growth are very different. The paper studys the imapct from two respects of the theotical and empirical study. Data are used in2012"China Statistical Yearbook" in GDP and three kinds of consumption from year1978to2011. Status of relationship between consumption and economic growth in China and the reasons of status are revealed. Based on the work, when strengthening the role of consumption to economic growth, different policies should be implyed according to the kinds of consumptions.The theoritical ananlysis of the situation is based on the Development Economics theory,the Stages of Economic Growth. Firstly, the period from the beginning of development to the developed stage is devided into four stages:the beginning development stage, high-speed development stage, the drive to maturity stage and the maturity stage. On different stages, the impact of economic growth for rural and urban resident consumption and government consumption are different. Secondly, the paper analyzes the the Crowding-in Effect and Crowding-out Effect of government expenditures on economy. The relative strength of two effects determines the effect of government expendtures. In the course of economic development, role of government consumption expenditure to economic growth has experienced a similar "Inverted U"-shaped trajectory. Finally, the difference of urban and rural resident consumption on economic growth is analyzed,as well as the change of the difference in the course of economic development. After the theorical analysis,we find that, with the development of economy, the gap of the two impacts changes from small to big. Eventually, due to the disappearing of dual economic structure, the gap becomes smaller and snaller, and finally disappears. In the empirical analysis, which is based on the data of GDP and three consumption categories from "China Statistical Yearbook"in2012, is performed on the relation between three major consumption categories and economy growth. Through Granger Causality test, no significant cause-effect relationship is observed except for the relation between consumption of urban citizens and economic growth under5%significant level. A VAR(2) model is used and then impulse response function and variance decomposition are conducted. From the empirical evidence, there are not significant correlation between three major consumption categories and economy growth, but the effects of three kinds of consumptions on the economy are all positive. There are closer relationship between consumptions of urban citizens and economic growth, and between consumptions of urban citizens and government expenditure, compared to consumption of rural residents. This indicates that rural residents have not enjoyed the benefit at the same level from economic development as the urban residents.Through the theoretical and empirical analysis, no obvious relationship between three main consumptions and economic growth in China is observed. Correlation of rural resident consumption, economic growth and government spending is not so significant as the correlation between urban resident consumption expenditure and the above latter two factors. Hence, this thesis presents the suggestion that differences between rural and urban resident consumption should be considered, while adopting policies to promote consumption to economic growth. Targeted measures are better than a "Cutting without Differentiation" policy.