An Analysis of the Consumer Demand Structure of Rural Residents in Chongqing City in the Context of New Urbanization

Xiaom in JIA

Southwest University，Chongqing 400700，China

1 Introduction

Since the2008 financial crisis，China's exports have been severely affected，and expanding domestic demand as the main driver of economic growth has become increasingly important.Relying heavily on imports makes domestic economic growth excessively dependenton the internationalmarket，and the volatility of the internationalmarket is bound to quickly transfer to China，causing fluctuations in domestic economic growth.In an increasingly globalized economy of today，to completely avoid the volatility of internationalmarkets is impossible，butwe can expand domestic demand so that China's economic growth ismore dependent on domestic demand，and reduce the impact of international economic fluctuations on the domestic economy to a low level.At present，China expands domestic demandmainly by increasing domestic investment and domestic consumption to promote national economic growth.The expansion of domestic investment has some bottlenecks，and in the case of insufficient domestic demand，the increase in domestic investment will cause industry overcapacity.The four trillion yuan（＄586 billion）stimulus package implemented in 2008 played a positive role in confronting the financial crisis，but it also led to the overcapacity of some industries.Promoting sustained growth of consumption is the most fundamental way to break China's current investment policy dilemma.Fig.1 shows the changes in components of GDP in Chongqing City.It can be seen from the figure that the share ofgross capital formation in GDP increased rapidly in Chongqing City during 1996－2007，but began to decrease after 2007；the share of consumer spending in GDPwas always in decline until2012.By further analysis，it is found that themodel of relying on investment to boost economy in Chongqing City has not achieved good effect，the investment-led domestic demand growth is facing bottlenecks，and economic development depending on continued consumption growth has become a new developmentmodel.The greatest potential for expanding domestic demand is in rural areas.However，the important influence of rural consumption on economic growth has been fully affirmed by the government，various supporting policies have been put forward，and some initial success has been achieved，but the rural consumermarket is immeasurable.How to expand domestic demand by the rural consumer market is controvertible.Since 2000，total rural and urban consumption of Chongqing has showed a growing trend，but the proportion of the two to GDPhas been polarized.The share of urban consumption in GDP increases year by year and remained atabout0.28 after2008 while the share of total rural consumer spending in GDP shows a clear downward trend.To further optimize the consumption structure，improve consumption level of rural residents，expand domestic demand and promote economic development，this papermainly uses extended linear expenditure system model and the corresponding analysis to examine the rural consumption structure and status in Chongqing City，evaluate and study the consumption structure of rural residents from different perspectives.

2 ELES model estimation and analysis of consumption structure of rural residents in Chongqing City

2.1 Research methodsCurrently，themain analysismethods for consumption structure include Engel's coefficient and extended linear expenditure system model（ELESM）.The two are closely related in termsof form and content.Engel's coefficient isan indicator to analyze residents'consumption structure，and it is often used to describe the relationship between income and consumption structure at specific stages，but it does not apply to the in-depth comparison and analysis of sub-divided consumption areas，and there are some limitations in the application.The outstanding advantage of ELESmodel is that it takes into account the income and price factors，so in the absence of price information，we can also estimate the expenditure of various commodities，and estimate the demand structure.In 1973，C.Liucch made two amendments on LES（linear expenditure system）model developed by R.Stone in 1954.He replaced total consumer spending V with income Y，so that the consumer spendingwas seen as the function of income and price，and used themarginal propensity to consume to replace the marginal budget share，in order to develop new linear expenditure system ELES.The specificmodel form is as follows：

where Virepresents total consumer demand for a commodity；pirepresents the price of commodity i；qirepresents the actual demand for commodity i；rirepresents the demand for commodity i tomeet consumers'basic living standard；biis the marginal propensity to consume commodity i，0≤bi≤1（i＝1，2，…，n）and∑bi≤1；I is the per capita disposable income of consumers.

Using the least squaremethod，we can calculate the estimated value of parameters aiand biin formula（3），and calculate the basic consumer spending piriof commodity i.The formula is as follows：

2.2 Data sourcesThe data are from Chongqing Statistical Yearbook（1999－2014）.By calculation，we get eight categories of data concerning household consumption expenditure（food；clothing；household equipment and services；health care；transport and communications；culture，education and entertainment products and services；housing；other goods and services），and put various types of consumption in different years into time series.

2.3 Analysis resultsUsing SPSS18.0 for analysis，we derive the ELESmodel parameters and corresponding statistics related to the consumption structure of urban and rural residents in Chongqing.We can see that at the significance level ofα＝0.05，the estimated values ofαiandβipass T test；the goodness of fit of themodel（R2）ishigh，and the goodness of fitof cultural and entertainment consumption equation is not high.In ELESmodel，βiis themarginal propensity to consume.The indicator shows the amount of change in consumer spending caused by each additional unit of income.Themarginal propensity to consume of rural residents in Chongqing during 1999－2014 isβ＝∑βi＝0.659，indicating that rural residents in Chongqing take out65.9%of new income for consumer spending.From the data in Table 1，we can get the marginal propensity to consume for various consumption items，and themarginal propensity to consume food ismost obvious（βfood＝0.276）.The rural residents in Chongqingwilluse27.6%of new income to increase the daily food consumption，which reflects that rural residents'food consumption expenditure in Chongqing City still has a large proportion.βhousing＝0.077 and βhealthcare＝0.075，indicating that the propensity to consume housing and health care is substantially similar，and the consumer expectations are high；the propensity to consume other typesof commodities is relatively low.

Table 1 ELESmodel parameter values of various types of consumer spending during 1999－2014

3 Conclusions

Using ELESmodel，we conduct a study on rural residents'consumption structure in Chongqing City，and the results show that the food expenditure is still the main source of overall consumer spending for rural residents in Chongqing City，and rural residents'consumption structure has not yet been optimized and upgraded，so it is necessary to promote the diversification of residents'consumption.The rural consumer market is not well developed，the consumption rate is low，and consumption structure is irrational，so the government should actively carry outnew rural construction，and upgrade the spending power，consumer awareness and consumer environment in ruralareas.In ruralareas，it isnecessary to improve the financial transfer payment system to provide farmers with additional sources of income，and stabilize the levels of consumer spending；speed up poverty alleviation and development in poverty-stricken counties，and develop special industries to promote coordinated growth of income and consumption；enhance the transfer of rural land management rights，and clearly define the ownership of rural farmland，woodland and waters，to underpin the consumer base of farmers；accelerate the popularization of household appliances，cars，agricultural vehicles，the Internet，communication and transportation，to createmore consumption hot spots.There is an urgent need to continue to increase income to strengthen the base of rural consumption，so that the net income of rural residents can be largely used to improve living conditions，upgrade health care，and update household entertainment equipment，transportation and communication.The endogenous relationship between urbanization and urban-rural residents'consumption showsgreater complexity.Urbanization plays a role in promoting rural residents'consumption in general，and the increase of urbanization rate helps to raise the consumption level of rural residents.The improvement of urbanization can be actually conducive to the expansion of consumer demand.In the case of bottlenecks and difficulties in using investmentand export to promote economic growth at present，accelerating the pace of urbanization has become an important way to promote sustained and rapid economic growth，but the growth of consumption plays a certain role in inhibiting urbanization pace，therefore，to ensure healthy and sustainable urbanization，wemust take into account the counter-effect of consumption on the development of urbanization.There are many factors affecting the development of cities and towns，but it ismainly focused on income，income uncertainty，expenditure and expenditure uncertainty.Meanwhile，these factors have a significant impact on consumer spending.Therefore，establishing sound social security system，income growth mechanism and stabilizing the price level has become an important way to keep sustained consumption growth and healthy development of urbanization.In the future，the improvement of population's urbanization rate will further narrow the income gap between urban and rural areas，and play amajor role，but it isnecessary to be alert to the threshold in population urbanization，and excessive population urbanization will increase income gap between urban and rural areas and affect economic growth.It should focus on re-orientation of governmentled measures，develop private economy，enhance private investment，adoptmarket-oriented mechanism and promote the rational allocation of factors to actively respond to the negative effects of urbanization.

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