TITLE:
Empirical Research of Chinese Residents’ Consumption Behaviors Based on Consumption Functions
AUTHORS:
Yan Xiao, Liting Liao
KEYWORDS:
Money Illusion, Over-Reaction, Irrational Consumption Behavior
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.6,
June
15,
2018
ABSTRACT: This paper simply expands two famous consume functions referring to macro-economics: Keynesian consumption
function and Life-cycle consumption function; attempting to introduce the empirical proxy variance of irrational facts:
money illusion and over-reaction, we rebuild a new Keynesian consumption model
and Life-cycle consumption model, both of which are based on the hypothesis of
resident’s irrational behavior. Then we use the new model to empirically test
the macroeconomic years’ data
of China’s urban residents from 1978 to 2013 and China’s rural residents from
1985 to 2013. The
empirical results show that all residents of China are irrational, however, the
reasons of cause irrational consumption are different, and the urban residents may be for money illusion, but
the rural residents may show over-reaction to price volatility. Finally, we
give theory analysis about the differences of the two irrational consumption
behaviors and the results of the paper.