Abstract

In China, income diversification has become a useful method for the rural households to smooth their income and maintain a sustainable mode of consumption. Additionally, income diversification affects rural consumption differently in regions with different income levels. In this paper, I have analyzed the impacts of income diversification on the peasants’ consumption in the Chinese rural areas with the provincial level panel data from 1998 to 2015. The findings indicate that income diversification can increase the Chinese peasants’ consumption, but the consumption of the peasants from the low- and the high- income subsamples of provinces are more sensitive to income diversification while the peasants from the middle-income provinces are not so sensitive to income diversification. Moreover, there is a significant ratchet effect and demonstration effect in the peasants’ consumption, as is stated by the traditional literature. This paper contributes to the research by testing the impact of peasants’ income sources diversification on the rural consumption and investigating its mechanism against the changing social background in China with the latest panel data.

Highlights

  • How can income diversification affect the rural consumption in developing countries with striking regional differences, such as China? It has been concluded that income diversification is an effective way to increase the households’ well-being in developing countries [1]

  • The possible reason is that it is considered that income diversification can increase peasants’ income, so it is adequate just to study the impact of income increase on rural consumption

  • It is necessary to test whether the rural consumption mode is influenced by income diversification with income level being controlled

Read more

Summary

Introduction

How can income diversification affect the rural consumption in developing countries with striking regional differences, such as China? It has been concluded that income diversification is an effective way to increase the households’ well-being in developing countries [1]. Sometimes, income diversification can influence the consumption without changing income greatly. It is necessary to test whether the rural consumption mode is influenced by income diversification with income level being controlled. In rural China, peasants began to earn extra income from sources besides farming since the government adopted the reform and open-door policy in 1978. Since 1978, owing to the reform policy, the peasants have been provided a lot of opportunities to increase their income from sources besides farming [16]. For many Chinese peasants, farming is no longer the most important income source. They have to depend on other sources of income, which can bring them some extra money.

Methods
Results
Discussion
Conclusion
Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call