Analysis of China's Consumption Function

Author: Zang Xuheng
Publisher:
Publish Date: 1994-12-01
Features: The methods adopted by the author in this book are primarily econometric methods, using linear regression model analysis and other related methods to verify various hypotheses and models. I am not familiar with these methods and have no right to comment, but I believe that limiting normative analysis alone is far from sufficient in the field of economics. Therefore, it is undoubtedly necessary to analytically draw on some mathematical analysis methods from Western economics to address the shortcomings of our existing research. Thus, although I know very little about this, I still greatly appreciate the author's attempt. If there are any shortcomings or defects in this regard, or even if it leads to some comments and objections, that would be very beneficial for research in this field.
In addition to the preface, the book can be summarized into three parts:
- Chapters 1 to 3 are theoretical analysis.
- Chapters 4 to 8 are empirical testing.
- Chapter 9 is analytical conclusions and policy implications.
1. Theoretical Analysis Part:
- In the theoretical analysis part, first (Chapter 1), the theoretical framework for analyzing consumer behavior is summarized, primarily the neoclassical theoretical framework. It compares the similarities and differences in consumer behavior assumptions across various consumption function hypotheses. Then (Chapter 2), institutional factors are incorporated into the analytical framework to analyze the external environment faced by Chinese consumers and its impact on their consumption behavior. From this, the external and internal settings of consumer behavior are derived based on the Chinese context, and these are compared with the settings of neoclassical theory and different consumption function theories to formulate hypotheses about Chinese consumer behavior. Throughout this process, the phased and urban-rural analysis methods mentioned earlier are consistently applied. Finally (Chapter 3), based on the above analysis, the hypothesis of the Chinese consumption function is deduced, and a theoretical model of the consumption function is established, differentiated by phase and urban-rural areas. Additionally, the methods and viewpoints of several major discussions on the Chinese consumption function are analyzed and compared, with a focus on methodologically exploring three important issues in Chinese consumption function research.
2. Empirical Testing Part:
- In the empirical testing part, phased and urban-rural data are used to verify the hypotheses and models proposed in the theoretical analysis part. The five chapters of empirical testing can be summarized into two parts:
- The first part is Chapter 4, which tests the hypotheses and models for the period before 1978. Based on the analysis in the theoretical part, before 1978, China's consumption function was relatively close to Keynes's absolute income hypothesis, with residents' current consumption primarily determined by current income. The basic premise for this view lies in the non-cross-temporal, current-period budget constraint as the primary constraint on residents' consumption behavior. In addition to the current-period budget constraint, other factors also influence residents' current consumption. Under the traditional system, urban residents' consumption behavior was constrained by the rationing of consumer goods and shortages, so the rationing and shortages should be included as major variables affecting urban residents' consumption. On the other hand, rural residents' consumption behavior was heavily influenced by material income and self-sufficient consumption due to the underdeveloped commodity economy in rural areas, which were in a semi-natural economic state. Additionally, the price ratio between industrial and agricultural products also affected rural residents' consumption behavior. Therefore, material income, self-sufficient consumption, and the price ratio between industrial and agricultural products are the main variables, in addition to current monetary income, that explain rural residents' consumption. Chapter 4 uses aggregate time series data from 1952 to 1977 on urban and rural residents' consumption, income, assets, etc., as well as cross-sectional data from household income and expenditure surveys in urban and rural areas to test the hypotheses and models.
- The second part tests the hypotheses and models for the period after 1978. This is the focus of the empirical testing part, covering Chapters 5 to 8, which include:
- Chapter 5: Aggregate time series data analysis.
- Chapter 6: Household budget data analysis.
- Chapter 7: Analysis of factors affecting residents' consumption.
- Chapter 8: Analysis of the impact of household asset choices and personal investment behavior on consumption.
- In these four chapters, the changes in the external environment of consumer behavior after 1978 are analyzed in detail, and the hypotheses and models proposed in this book for the period after 1978 are verified.
3. Analytical Conclusions and Policy Implications Part:
- Chapter 9 summarizes the main conclusions drawn from the analysis and their policy implications. Additionally, it discusses issues that require further research.