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

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.