Empirical Research on the Non-Linear Inherent Relationship between China’s Social Security Expenditure and Private Consumption

Abstract:

For the existing lack of empirical research of relationship between social security expenditure and private consumption, this paper verified the existence of nonlinear relationship between both in China from 1952 to 2009 by applying nonlinear STR model. The conclusions demonstrate that between both is obviously negative relationship, although it is similar to most of the existing conclusions, but different in manifestation, i.e. the negative relationship presents remarkable stage characteristics and is frequently converted between linear and nonlinear. This negative relationship can be specifically divided into three stages: 1. negative nonlinear relationship from the year 1958 to 1963; 2. insignificant relationship from the year 1964 to 1978; 3. the reconverted negative nonlinear relationship from the year 1979 to 2009.The maximum elasticity of social security expenditure in the second and third order lags on consumption level amount to -0.0898 and -0.1024 respectively, and the crowding out effect is higher. These conclusions provide a realistic theoretical basis for China to develop and implement policies of social security expenditure.

• Periodical: Advanced Materials Research (Volumes 403-408)
• Pages: 335-342
• DOI: https://doi.org/10.4028/www.scientific.net/AMR.403-408.335
• Online since: November 2011
• Authors: Jian Guo Zhao, Jia Li
• Keywords: Private Consumption, Social Security Expenditure, STR Model

References

[1] Feldstein M S. Social Security and Saving: New Time Series Evidence[J]. National Tax Journal, 1996, 49(2); 151-164.

DOI: 10.1086/ntj41789194

[2] Kurz M. The Life-Cycle Hypothesis and the Effects of Social Security and Private Pensions on Family Savings[R]. Stanford: IMSS, (1981).

[3] Barro R J. The Tmpact of Tocial Tecurity on PrivateSaving: Evidence from the U.S. Time Series[R]. Washington: American Enterprise Institute, (1978).

[4] Leirmer D R Lesnory S D. Social Security and Private Saving: New Time Series Evidence . Journal of Political Economy, 1982, 90(3): 606-629.

DOI: 10.1086/261077

[5] Esposito L P. Effect of Social Security on Saving: Review of Studies Using U.S. Time-Series Data. Social Security Bulletin, 1978 , 41 (5): 9-17.

[6] Eisner R. Social Security, Saving and Macroeconomic. Journal of macroeconomic, 1983, 5(1): 1-19.

[7] Burman M. Social Security and Private Saving: A Review of the Empirical Evidence[R] . Washington.: CBO, (1998).

[8] Yang tian yu, Wang xiao ting. The Impact of Social Security on Private Consumption in China[J]. Probe, 2007, (5): 63-66.

[9] Li Meixiang, Wang yongle. Social Protection Expenditure from Governments and Consumption Based on Empirical Analysis in Euro Area and China[J]. Science-Technology and Management, 2010, 12(7): 116-119.

[10] Zhang Zhijue, Wu dingzheng. China's Financial Social Security Expenditure Crowd in or out Private Consumption[J]. Consumer Economic, 2010, 26(6): 67-69.

[11] Zhao Jinwen, Fan Jitao. Empirical Research on the Inherent Relationship between Economy Growth and Energy Consumption in China[J]. Economic Research Journal, 2007, (8): 31-42.

[12] MOF Social Security Research Group. International Comparison of Social Security Expenditure Level. Public Finance Research, 2007，(10): 36-42.

[13] Tuo Guozhu, Wang Guojun. The Research on Agricultural Insurance and Rural Social Security System[M]. Capital University of Economics and Business Press, 2002. Calculated by CEInet database statistics.