6058 
7879According to the survey data of CFPS in Peking University from 2010 to 2014, this paper deeply analyzes the regional differences and causes of household consumption smoothing in China. Firstly, based on the risk-sharing model, the appropriate agent variables are selected to measure the ability of consumption smoothing in the eastern, central and western regions, including urban and rural areas. Secondly, the Oaxaca-Blinder decomposition method is adopted from the three angles: family self-sufficiency, social networks and national policies, to find the root source of smooth consumption. The study finds that households in the eastern region own the strongest ability of consumption smoothing, followed by the middle and the weakest in the west, and the urban households also have stronger spending power than the rural households. The main sources of differences in consumption smoothing regions are from the level of household self-sufficiency and national policies, especially the role of household net assets and government subsidies. It also reflects that the government fails to use transfer payments and other means to carry out effective income redistribution, so as to achieve the purpose of narrowing consumption differences between regions. Social networks play a significant positive role in narrowing the regional gap in consumption smoothing. Some other factors such as the level of the head’s education, family size, and regional financial development also affect the ability to smooth. All regions need to focus on the deep-rooted sources of household consumption smoothing, which can effectively increase the potential of local consumption.
/ Journals / Journal of Finance and Economics
Journal of Finance and Economics
LiuYuanchun, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YaoLan BaoXiaohua HuangJun, Vice Editor-in-Chief
Regional Differences in China’s Consumption Smoothing and Its Root Causes：A Comparative Analysis of Families，Communities and Governments
Journal of Finance and Economics Vol. 45, Issue 04, pp. 124 - 139 (2019) DOI:10.16538/j.cnki.jfe.2019.04.010
Summary
References
Summary
[1]Cai N, Li G, Ruan G H. The effect of interest rate policy on the intertemporal consumption choice of Chinese residents[J]. Economic Science, 2002, (4): 23-24. (In Chinese)
[2]Chen Y Y, Xing W B. Consumption smoothing, risk sharing and full insurance: An empirical research on urban household survey[J]. China Economic Quarterly, 2007, (1): 253-272. (In Chinese)
[3]Deng K B, Yi X J. The heterogeneity of precautionary saving motives and the change of consumption propensity: A study on urban inhabitants in China[J]. Finance & Trade Economics, 2010, (5): 14-19. (In Chinese)
[4]Deng Q H. Consumption smoothing in rural households: A test of the full insurance hypothesis[J]. Zhejiang Academic Journal, 2012, (5): 163-173. (In Chinese)
[5]Gao M T, Bi L L. The demographic characters of rural households and increasing rate of farmer consumption: Evidence from eight provinces in China[J]. Chinese Journal of Population Science, 2010, (6): 70-78. (In Chinese)
[6]Guo X H, Li Z Y. The effect of labor supply on consumption smoothing: An empirical research based on RUMiC data[J]. Journal of Xiangtan University (Philosophy and Social Sciences), 2017, (1): 72-79. (In Chinese)
[7]Guo Y N, Yao Y, Foltz J. The formal and informal authority, the accountability and the smooth consumption: The data from the experience from China’s villages[J]. Management World, 2012, (1): 67-78. (In Chinese)
[8]Kou E H, Hou H H. Consumption smoothing, income shocks and partial insurance: An empirical research based on rural household survey[J]. Finance & Trade Economics, 2015, (9): 33-45. (In Chinese)
[9]Li H B, Shi X Z, Wu B Z. Do Chinese households smooth consumption around retirement?[J]. China Economic Quarterly, 2015, (1): 117-134. (In Chinese)
[10]Lu M, Zhang S, Hiroshi S. Can social capital be used as an insurance mechanism in the process of marketization? An empirical study on the post-disaster consumption of rural households in China[J]. World Economic Papers, 2010, (1): 16-38. (In Chinese)
[11]Ma X Y, Bai Y X. Chinese farmers income risk coping mechanisms and consumption fluctuations: An empirical study from Shanxi province[J]. China Economic Quarterly, 2009, (4): 1221-1238. (In Chinese)
[12]Su F, Fang L. Regional differences in rural financial exclusion in China: Insufficient supply or insufficient demand? Comparative analysis of banking, insurance and internet finance[J]. Management World, 2016, (9): 70-83. (In Chinese)
[13]Wang X Q, Luo D T, Wang Q. Informal insurance system and farmers’ risk sharing modeling and policy implications: An empirical study from CFPS data[J]. Economic Science, 2016, (6): 89-101. (In Chinese)
[14]Xing C B. Income gap between migrant workers and urban workers[J]. Management World, 2008, (5): 55-64. (In Chinese)
[15]Zou H, Yu K Z. Retirement and urban household consumption: Based on empirical evidences of regression discontinuity design[J]. Economic Research Journal, 2015, (1): 124-139. (In Chinese)
[16]Zuo W M, Mo X H, Chen H Q. A literature review of consumption pattern in China[J]. Business Management Journal, 2015, (2): 189-199. (In Chinese)
[17]Ambrus A, Mobius M, Szeidl A. Consumption risk-sharing in social networks[J]. The American Economic Review, 2014, 104(1): 149-182. DOI:10.1257/aer.104.1.149
[18]Angelucci M, De Giorgi G, Rangel M A, et al. Family networks and school enrolment: Evidence from a randomized social experiment[J]. Journal of Public Economics, 2010, 94(3-4): 197-221. DOI:10.1016/j.jpubeco.2009.12.002
[19]Attanasio O, Meghir C, Mommaerts C. Insurance in extended family networks[R]. NBER Working Paper No.21059, 2015.
[20]Attanasio O, Meghir C, Santiago A. Education choices in Mexico: Using a structural model and a randomized experiment to evaluate Progresa[J]. The Review of Economic Studies, 2012, 79(1): 37-66. DOI:10.1093/restud/rdr015
[21]Bayoumi T. Explaining consumption: A simple test of alternative hypotheses[J]. Staff Papers-International Monetary Fund, 1997, 44(4): 462-484. DOI:10.2307/3867462
[22]Bazzi S, Sumarto S, Suryahadi A. It’s all in the timing: Cash transfers and consumption smoothing in a developing country[J]. Journal of Economic Behavior & Organization, 2015, 119: 267-288.
[23]Blundell R, Pistaferri L, Preston I. Consumption inequality and partial insurance[J]. American Economic Review, 2008, 98(5): 1887-1921. DOI:10.1257/aer.98.5.1887
[24]Blundell R, Pistaferri L, Saporta-Eksten I. Consumption inequality and family labor supply[J]. American Economic Review, 2016, 106(2): 387-435. DOI:10.1257/aer.20121549
[25]Blundell R, Pistaferri L, Saporta-Eksten I. Children, time allocation and consumption insurance[R]. NBER Working Paper No.24006, 2017.
[26]Bramoullé Y, Kranton R. Public goods in networks[J]. Journal of Economic Theory, 2007, 135(1): 478-494. DOI:10.1016/j.jet.2006.06.006
[27]Bronchetti E T. Workers’ compensation and consumption smoothing[J]. Journal of Public Economics, 2012, 96(5-6): 495-508. DOI:10.1016/j.jpubeco.2011.12.005
[28]Chetty R, Looney A. Consumption smoothing and the welfare consequences of social insurance in developing economies[J]. Journal of Public Economics, 2006, 90(12): 2351-2356. DOI:10.1016/j.jpubeco.2006.07.002
[29]Colmer J, Alem Y. Consumption smoothing and the welfare cost of uncertainty[R]. Centre for Climate Change Economics and Policy Working Paper No.138, 2015.
[30]Deaton A. On risk, insurance, and intra-village consumption smoothing[R]. Research Program in Development Studies, Working Paper, 1990.
[31]Diamond P A. The role of a stock market in a general equilibrium model with technological uncertainty[J]. American Economic Review, 1967, 57(4): 759-776.
[32]Fafchamps M, Lund S. Risk-sharing networks in rural Philippines[J]. Journal of Development Economics, 2003, 71(2): 261-287. DOI:10.1016/S0304-3878(03)00029-4
[33]Friedman M. The permanent income hypothesis: Comment[J]. American Economics Review, 1957, 48(5): 990-991.
[34]Gruber J. The consumption smoothing benefits of unemployment insurance[J]. American Economic Review, 1997, 87(1): 192-205.
[35]Gruber J. Cash welfare as a consumption smoothing mechanism for divorced mothers[J]. Journal of Public Economics, 2000, 75(2): 157-182. DOI:10.1016/S0047-2727(99)00080-8
[36]Gul F, Pesendorfer W. Self-control and the theory of consumption[J]. Econometrica, 2004, 72(1): 119-158. DOI:10.1111/ecta.2004.72.issue-1
[37]Jann B. A Stata implementation of the Blinder-Oaxaca decomposition[R]. Eth Zurich Sociology Working Papers No.8, 2008.
[38]Kaplan G, Violante G L. A model of the consumption response to fiscal stimulus payments[J]. Econometrica, 2014, 82(4): 1199-1239. DOI:10.3982/ECTA10528
[39]Kochar A. Smoothing consumption by smoothing income: Hours-of-work responses to idiosyncratic agricultural shocks in rural India[J]. Review of Economics and Statistics, 1999, 81(1): 50-61. DOI:10.1162/003465399767923818
[40]L’Huillier J P, Piguillem F, Flemming J. The optimal tradeoff between consumption smoothing and macroprudential regulation[R]. Meeting Papers 492, Society for Economic Dynamics, 2015.
[41]Ljungqvist L, Uhlig H. Tax policy and aggregate demand management under catching up with the joneses[J]. American Economic Review, 2000, 90(3): 356-366. DOI:10.1257/aer.90.3.356
[42]Meng X. Unemployment, consumption smoothing, and precautionary saving in urban China[J]. Journal of Comparative Economics, 2003, 31(3): 465-485. DOI:10.1016/S0147-5967(03)00069-6
[43]Modigliani F, Brumberg R. Utility analysis and the consumption function: An interpretation of cross-section data[A].Kurihara K. Post Keynesian economics[C]. New Brunswick: Rutgers University Press, 1954.
[44]Townsend R M. Risk and insurance in village India[J]. Econometrica, 1994, 62(3): 539-591. DOI:10.2307/2951659
[45]Udry C. Risk and saving in northern Nigeria[J]. American Economic Review, 1995, 85(5): 1287-1300.
[46]Zheng Y, Santaeulalia-Llopis R. Partial insurance and aggregate welfare in China: 1989 to 2009[R]. Meeting Papers 1389, Society for Economic Dynamics, 2014.
Cite this article
Li Li, Li Chunqi. Regional Differences in China’s Consumption Smoothing and Its Root Causes：A Comparative Analysis of Families，Communities and Governments[J]. Journal of Finance and Economics, 2019, 45(4): 124-139.
Export Citations as:
For
ISSUE COVER
RELATED ARTICLES
