Will Participation of the Housing Provident Fund System Alleviate Consumption Inequality?

Wu Yidong, Zhang Lun, Wang Xianzhu

Journal of Shanghai University of Finance and Economics Vol. 27, Issue 02, pp. 108 - 124 (2025)  DOI:10.16538/j.cnki.jsufe.2025.02.008

Summary

Common prosperity is the essential requirement of socialism and an important feature of Chinese path to modernization. Narrowing the consumption gap is a key path in achieving common prosperity, and the housing provident fund system is an important financial means to alleviate residents’ consumption pressure. Previous literature has studied the impact of participation of the housing provident fund system on consumption demand, but there is still insufficient research on its impact on consumer inequality. This paper selects data from the 2015-2019 China Household Finance Survey (CHFS) to empirically study the impact of individual-level participation of the housing provident fund system on consumption inequality, namely relative deprivation of consumption. The study shows that participation of the housing provident fund system can significantly alleviate the relative deprivation of individual consumption, and the deeper the level of participation, the more obvious the relief effect. After considering endogeneity issues and conducting robustness tests, the conclusion still holds. The wealth effect, income effect, and savings effect are its main influencing mechanisms. Heterogeneity analysis based on demographic characteristics, socio-economic characteristics, and regional economic characteristics finds that middle-aged and elderly, married, low-income, and flexible employment groups, and risk-averse individuals have a stronger dependence on the housing provident fund. Further discussion reveals that families with a higher level of relative deprivation of consumption are more sensitive to participation of the housing provident fund system. In addition, participation of the housing provident fund system is conducive to promoting the upgrading of consumption structure. This paper provides micro evidence for alleviating relative deprivation of consumption, promoting social equity, and sharing the fruits of socialist development.

Keywords

housing provident fund; relative deprivation of consumption; inequality; common prosperity