Analysis of the Effect of Demographic Structure on Rural Household Consumption in China

Abstract

China has attracted increasing attention because it is the world’s most populous nation and it has maintained phenomenal rates of economic growth in recent years. However, consumption in China is unusually low and has continued to decline as a share of GDP over the past decade. In this paper, we conduct a dynamic panel analysis of the determinants of the household consumption ratio in rural China by using panel data on Chinese provinces from years 1995-2009. Demographic factors, such as dependency ratio or sex ratio, cannot be overlooked in terms of their impact on consumption in rural China. The results suggest that the sex ratio and old dependency ratio have a strong negative impact on household consumption while the young dependency ratio appears to have a positive impact. Finally, we make some proposals to the policy-making of aging population consumption.