A Study on the Impact of Income Gap on Consumer Demand: An Empirical Test Based on the Spatial Panel Durbin Model

Abstract

The study utilizes China Household Panel Survey (CFPS) data from 2010 to 2020 to create a spatial panel Durbin model and examines the spatial spillover effect of the income gap on consumer demand using spatial econometric techniques. Studies have shown that the income gap has a notable inverted U-shaped influence on consumer demand, and there is a strong inverted U-shaped spatial spillover effect between surrounding locations. Expanding the income difference within a specific range boosts consumer demand in both local and surrounding areas. Further increasing the income difference impedes the growth of consumer demand in both local and surrounding regions. Regional variations significantly impact how the income gap affects consumer demand through spatial spillover. From the perspective of consumption quantity, the “inverted U-shaped” inflection point in economically developed regions and eastern regions is on the left side of economically underdeveloped regions and western regions; from the perspective of consumer quality, this result is exactly the opposite. China should persist in enhancing efforts to advance income distribution system reform and improvement, bolster the development of inclusive, fundamental, and grassroots livelihoods, manage residents’ income gap amid evolving income levels, and stimulate consumer demand in local and neighboring regions.