Analysis on Consumer's Behavior under Uncertainty in Rural Nanjing: Based on Permanent Income Hypothesis

The paper estimated the long-term equilibrium relationship between consumption and income under the frame of self-adaptive expectation and permanent income hypothesis with the rural Nanjing household data from 1982 to 2008.The result showed that the income increase stimulates consumption and there is remarkable difference between the three periods 1982—1997,1998—2002,2003—2008 in the long-term MPC(Marginal Propensity to Consume)with 1998—2002 as the lowest,indicating the increase in the preventive savings in the period.The paper also estimated the short-term dynamic consumption function of the three periods by error correction model(ECM) and the uncertainty variable is applied to ECM.The results were the same as the long-term consumption function: raising income sped up consumption and the income uncertainty displayed negative influence on the consumption in the second period.Therefore,to raise the farmers' consumption,the key is to raise their income,improve their income consumption expectation and reduce the precautionary savings resulted from uncertainty.