Abstract
In our paper, we test how the social security system affects citizens’ consumption behavior through narrowing the income gap between residents with different social status and decreasing the uncertainty of income and cost. In the theoretical part, we firstly extend the model of Keynes to test the income distribution hypothesis; then, we use the coefficient of absolute risk aversion (CARA) model and a two-period model to test the uncertainty hypothesis. Empirically, (1) we use China’s data (2003–2012) to test the theoretical results, and find that the social security system has a positive effect on consumption by reducing the income gap; (2) according to a 10-year panel data (2003–2012), we find that reducing income uncertainty can increase consumption. Besides, medical insurance and endowment insurance have a positive impact on consumption by reducing citizens’ cost uncertainty, but to different extents.
Highlights
Social security plays an important role in social stability and sustainable development in a country
This paper will comprehensively study the impact of the social security system on the consumption of Chinese residents based on theoretical model deduction and empirical data analysis from two aspects: narrowing the income gap and reducing uncertainty in the social security system
Where COMjt represents the per-capita consumption expenditure in the t period in province j, PENSIONjt indicates the proportion of social endowment insurance coverage in the t period, MEDICALjt represents the proportion of social medical insurance coverage in the t period, I NCOMEjt shows the average per capita disposable income in the t period in province j, SIZEjt is the average amount of family member of household in period t, and CPIjt is the consumption index of province j
Summary
Social security plays an important role in social stability and sustainable development in a country. Previous scholars have studied the impact of endowment or medical insurance on consumption independently, or qualitatively studied the relationship between them from the perspective of the whole social security system, but seldom systematically examined the effect of the social security system on consumption from two aspects such as the adjustment of income distribution and the influence of uncertainty [10,11,12] For this purpose, this paper will comprehensively study the impact of the social security system on the consumption of Chinese residents based on theoretical model deduction and empirical data analysis from two aspects: narrowing the income gap and reducing uncertainty in the social security system. This paper will comprehensively study the impact of the social security system on the consumption of Chinese residents based on theoretical model deduction and empirical data analysis from two aspects: narrowing the income gap and reducing uncertainty in the social security system By exploring these mechanisms, we can point out an effective and sustainable way to increase the vitality of the economy while enhancing the residents’ welfare and happiness
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