An Empirical Analysis Of Chinese Resident Income Distribution And Consumption Demand

Nowadays all economists recognize that consumption, investment and net exportsare three powerful driving forces to stimulate domestic economy. Since the U.S. financialcrisis in2007, the deterioration of international economic environment has made foreigndemand for our country keep slumping. National statistics show that nearly a decade thecontribution rate of investment to the gross domestic product (GDP) growth is higherthan that of consumption to the national economy, which reflects weak domestic demandand over-reliance on investment in current China. Therefore, stimulating domesticdemand has become an important means of national macro-control.With the reform and opening up and development of the market economy, there is anon-negligible problem of the widening social gap between rich and poor at present. Firstof all, the thesis classifies different urban income groups from the point of incomedistribution structure. Theoretical formulas and models are used to explore therelationship between the relative position of income distribution and its influence degreeon average propensity to consume (APC). At the same time, the paper makes a furthercomparative analysis about APC of different social income groups under the incomeeffect. Then a conclusion is reached that improvement of allocation status of low andmiddle income groups would raise the level of overall consumption. Next, the paper usespanel data models to study the relationship between source of resident income andconsumption demand. Model estimations show that autonomous consumption andmarginal propensity to consume (MPC) caused by wage are maximum, and there is theminimal impact on total consumption by early consumption in this case. On the contrary,autonomous consumption and MPC of transferred income group are minimum, and theirconsumer inertia is maximum. Finally, the paper puts forward a series of policysuggestions for reducing the gap between rich and poor on the base of the findings thatincome distribution gap could constrain market consumption capacity.