Academic journal article Cross - Cultural Communication

The Empirical Study on the Different Effects on Urban and Rural Consumption by Urbanization in China

Academic journal article Cross - Cultural Communication

The Empirical Study on the Different Effects on Urban and Rural Consumption by Urbanization in China

Article excerpt

Abstract

Consumption and urbanization mainly by transferring labor force are important variables in China. The article puts the two into analysis to consider the quality of the urbanization, selecting the data of urbanization rate, average consumption of urban and rural residents, using econometric tools of co-integration analysis, ECM and Granger causality test, and after that the paper finds the effects on urban and rural consumption by urbanization are extremely different: The urbanization rate has a long-term equilibrium relationship with urban residents' consumption, but does not have this relationship with rural one. The dynamic relationship between the urban consumption and urbanization is that the former makes the latter rise up, then the two promote each other, and finally the latter makes the former go up remarkably. Further more, although urbanization influences urban residents' consumption obviously, yet there is a delayed effect. So we should shift the production-factor-oriented urbanization model to people-oriented one, boost the supply of public goods, focus on the development of agricultural sector, increase the income of rural households to expand the consumption of rural residents and improve their qualities of lives.

Key words: UrbanizatioHousehold consumption; Disparate impact; People-oriented urbanization

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

With the slowdowns in the growth of recovering economies, the Chinese economy has stepped into "the second season". "Structure adjusting and reform accelerating" become the new means by which the fresh government runs the economy, and the enlargement of domestic demands is emphasized to be the biggest structure adjusting, so urbanization that carries the double responsibilities of achieving modernization and expanding domestic demand has attracted tremendous attentions. Nevertheless, what is the real effect on the demand and life quality of the residents by the Chinese urbanization over the 30 years after the opening up policy? Dose this effect make a significant difference in the urban and rural consumption? Can any defects of this kind of urbanization mode be found from the difference and thus any new approaches of urbanization be explored? This series of questions needs to be answered by theoretical and empirical analysis.

1. EXISTING RELATED STUDIES

The study on consumption has always been the core and key points in economics. W. Arthur Lewis pointed out that the rural population would transfer to the cities because of the difference in labor productivity and income between the urban and rural areas, and this trend could boost the consumption of the whole society. Fujita and Venables proved the geographic concentration of population and economic activities would produce versatile positive externalities, such as circulation and accumulated effect of consumption and cost, spillover effect of information technology and sharing effect of labor market and etc., and drew the conclusion that urbanization could enhance consumption and economic growth through agglomeration effect and scale effect.

From different perspectives and by different analysis method, Chinese scholars did research on the effects of urbanization on consumption, but the conclusions were not the same. Liu (2004) considered the contribution of urbanization to household consumption rate was close to zero since reforming and opening. Wang (2003) found that the rate of urbanization and the rate of household consumption were negatively correlated. Wan Yong's study demonstrated the structure effect and security effect of China's urbanization were not obvious; urbanization enhanced the availability of transaction and convenience of traffic, but did not promote the availability of residents' information and the income distribution between urban and rural areas dampened consumer demand (Wan, 2012). Cai (1999) indicated urbanization and consumer demands were endogenous; to drive consumer demand by the transformation of dual economic structure was not only an effective strategy of development in the long term, but also would have more positive effect in the macroeconomic situation of lack of effective demand. …

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