Consumption Behaviour Under Institutional Transitions in China

The study on Chinese consumption behaviour under institutional transitions is significant from a theoretical as well as a policy perspective. Ignoring heterogeneity in consumption behaviour across regions may lead to a bias in estimation results when modelling a consumption function. This paper attempts to provide an alternative empirical study on Chinese consumption behaviour where panel data estimation approaches are employed to capture heterogeneities across regions. Our findings suggest that there are significant changes in both urban and rural households’ consumption behaviour during 1990s and rural households’ consumption is more volatile and sensitive to the changes in economic variables than their counterparts in China.