Booming local economy a key to whetting rural consumption -Empirical study based on the decomposition of rural household income

CAI Yuezhou (蔡跃洲)
Institute of Quantitative & Technical Economics, Chinese Academy of Social Sciences

Abstract:
Based on the decomposition of China’s rural household income, we made quantitative analyses of the factors affecting
rural consumption by using co-integration and other econometric tools. By comparing the results with the ongoing
economic stimulus package rolled out by the central government, we analyzed the effects of different policies on rural
consumption. The empirical study and policy analysis show that: (1) income from household business operation,
wages, and fiscal relief funds are the three main factors affecting rural household consumption; (2) the ongoing
stimulus package, which includes both short-term measures like consumption subsidies and long-term policies aiming
to increase rural household income and improve the rural consumption environment, are effective in promoting
rural consumption; (3) in boosting rural consumption, emphasis should be put on various long-term policies. Fiscal
expenditure should put more weight on consumption than on agriculture, forestry and irrigation; and (4) intra-county economies are crucial in kicking off rural consumption. Policies should be stressed for integrating rural consumption and the development of local economies.
Key words:
rural household consumption, rural household income, economic stimulus package, fiscal expenditure on supporting
agriculture

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