The Relationship between Consumption and Economic Growth of Chinese Urban and Rural Residents since Reform and Opening-up -- An Empirical Analysis Based on Econometrics Models

TL;DR

This paper empirically analyzes how consumption by urban and rural residents in China since the reform era influences economic growth, highlighting urban consumption's stronger long-term impact on GDP using econometric models.

Contribution

It introduces a combined VAR and VEC model approach to quantify the effects of urban and rural consumption on China's economic growth over 40 years.

Findings

Urban and rural consumption increase GDP

Urban consumption has a greater long-term impact

Policy suggestions for boosting consumption growth

Abstract

Since Reform and Opening-up 40 years ago, China has made remarkable achievements in economic fields. And consumption activities, including household consumption, have played an important role in it. Consumer activity is the end of economic activity, because the ultimate aim of other economic activities is to meet consumer demand; consumer activity is the starting point of economic activity, because consumption can drive economic and social development. This paper selects the economic data of more than 40 years since Reform and Opening-up, and establishes the Vector Autoregressive (VAR) model and Vector Error Correction (VEC) model, analyzing the influence of consumption level and total consumption of urban and rural residents on economic growth. The conclusion is that the increase of urban consumption and rural consumption can lead to the increase of GDP, and in the long run, urban consumption can promote economic growth more than rural consumption. According to this conclusion, we analyze the reasons and puts forward some policy suggestions.