Study Of The Effects Of Social Security On Chinese Household Consumption

Since our country has implemented a proactive fiscal policy over the years, China’s investment rate and net exports continue to rise, but consumption rate remains low. The social security system is one of the most important factors affecting household consumption. The studies of the relationship between social security and household consumption and the discovery of the mechanisms of the effect of social security on household consumption behavior have important theoretical and practical significance. As for the studies, we can give full play to the role of social security to expand domestic demand, narrow the gap between urban and rural consumption, promote total consumption and economic growth and maintain sustained and healthy development of China’s economy. In this paper, we want to study how social security reduces precautionary savings motivation, thereby increases household consumption with modern life-cycle model as our main analytical framework.The first chapter is an introduction part. In this part, the article introduces the background and significance of the research and reviews the relevant research literature. Finally, the research methods, the paper structure and possible innovations are described.The second chapter mainly elaborates the mechanisms of the effect of social security on household consumption behavior. First, we review the development of the consumption function, focusing on the theory will be used:precautionary savings theory, liquidity constraints hypothesis and λ hypothesis. And then, on the basis of definition of the meanings of social security, we elaborate the mechanisms of the effect of social security on household consumption behavior from the following aspects: life-cycle theory, precautionary savings motive and income distribution effects.The third chapter mainly introduces the current situation of China’s social security and household consumption.In the fourth chapter, the paper establishes varying parameter model to study the dynamic path of the effect of social security on household consumption and examine the existence of the phenomenon of liquidity constraints and precautionary savings in consumption behavior of Chinese household.In the fifth chapter, the article establishes two level linear model to analyze how social security reduces precautionary savings motivation, thereby increases household consumption.The last chapter is our conclusions. On this basis, we put forward corresponding policy recommendations on how to improve our residents’ consumption motivation and the social security system. Finally, we illustrate the shortcomings of this study, as well as future research prospects and expectations.