The impact of basic public services on residents’ consumption in China

Abstract

China has the largest market potential in the world, but the resident consumption rate is relatively low. Releasing China’s consumption potential will contribute to the sustainable growth of China’s economy and the global economic recovery. Based on the supply of basic public services, this study analyzes the income and substitution effects of basic public services on residents’ consumption, with a view to finding channels and measures to stimulate residents’ consumption from the public sector. We first used the TOPSIS method of entropy weight to evaluate the public service level of 31 provinces in China, and then built a regression model to analyze the impact of public services on residents’ consumption, urban residents’ consumption, rural residents’ consumption, and the consumption gap between urban and rural residents. The study found that the improvement of public services has a significant positive effect on consumption, while public services also have a positive effect on narrowing the consumption gap between urban and rural residents, but the impact on urban and rural residents is different, and the positive effect on urban residents’ consumption is higher than that of rural residents. Based on the research results, this paper puts forward policy implications. On the one hand, we should increase the expenditure on basic public services, and on the other hand, we should optimize the layout of basic public services between urban and rural areas.