Effects of rationing on the consumption behavior of Chinese urban households during 1981–1987

Abstract

This paper investigates the impacts of housing, fuel, and food grain rationing on consumption behavior of Chinese urban households. Four versions of the Almost Ideal Demand System with different rationed goods were estimated using pooled time series for 1981–1987 and cross sectional data by income group from household expenditure surveys. The results show that rationing on housing and grain have had significant impacts on the demand for unrationed goods. If the current rationing system remains unchanged, Chinese urban households would continue to increase their demand for nonstaple food. This would yield a considerable pressure on food supply. Moreover, a reform in housing allocation and grain rationing would significantly reduce the distortion of consumer behavior in China.