The Regional Difference Analysis Of People’s Consumption And Income In China

With the sustainable development of the national economy, the growing gapbetween urban and rural is growing; meanwhile this unbalanced status quo of regionaleconomic development has become a bottleneck restricting the advancement of thewhole society. Therefore, this article studies the relationship between the income andconsumption in urban and rural areas, and then obtains the results of their differencesby the comparative study of the eastern, central and western areas in China, which willprovide some support for the government to put forward economic policies. Moreoverwhat we do also has a strong practical significance in promoting the evolution of adual economic structure, expanding domestic demand and narrowing the developmentgap between urban and rural areas.First, we discussed the cointegration relationship between income andconsumption. We selected this relationship of Chinese urban residents as the object ofour study and applied “annual per capita disposable income” and “annual per capitaconsumption expenditure" of the two variables and their data of the related year tostudy. In the course of the study we made use of ADF unit root test, cointegrationanalysis and error correction model theory.The results showed that the income is themain factor affecting the consumer spending; on the other hand, the changes generatedin short-term consumption can be corrected in the long-run equilibrium relationship ofthe income and consumption. Then, based on this conclusion, we tried to find moreobserved variables to reflect the income and consumption. On this basis we establishedthe structural equation model to study the regional differences in different areas ofChina. In the first place we take the eastern town areas as an example to get thedetailed steps, and then we considered the urban areas in central and western regionsrespectively in the same way, as well as the rural areas in central. Based on the roadmap of the relationship between income and consumption,we can draw that at thisstage the economic development of western regions is relatively falling behind, simultaneously it has a significant difference in urban and rural areas.Finally, we draw the conclusions by the research to provide policyrecommendations, in order to narrow the consumption and income gap in these threeregions of China and also narrow the gap between urban and rural areas targeted. Weexpect to bring about the economic growth by these policy measures.