Research on the Consumption Function of Rural Residents in Hunan Province

Based on literature review, according to relevant consumption data in Hunan Statistical Yearbook and China Statistical Yearbook during 1978-2009, the thesis selects three indexes involving the average income per rural resident, per capita living expenses of rural residents and per capita savings to conduct the unit root and co-integration test on the consumption and net income per rural residents in Hunan Province by adopting the generalized difference method and EVIEWS6.0, then according to the Modigliani Hypothesis of Consumption, Duesenberry Hypothesis of Consumption and Keynes Absolute Income Hypothesis, the thesis makes a fitting of Hunan consumption function model, aiming to find out the consumption function model suitable to Hunan Province. The results show that, Keynesian consumption function based on Absolute Income Hypothesis passes the statistical test and econometric test, while the consumption function model based on Relative Income Hypothesis and that based on Life Cycle Hypothesis do not, which proves that the consumption function model based on Absolute Income Hypothesis is better suited for describing the relations between rural consumption and income in Hunan Province. Taking into account the low marginal propensity of consumption of the rural residents in Hunan Province, the thesis proposes to expand consumption demand of rural residents: firstly, developing characteristic economy and improving the income level of rural residents; secondly, perfecting the social security system in rural areas and maintaining the consumption confidence of rural residents; thirdly, ameliorating the circulation system.