Influence of Urbanization on Grow th of Rural Residents' Consumption in Western Ethnic Minority Areas of China

Xiaofang ZOU

1.School of Economics，Yangtze University，Jingzhou 434025，China；2.Hubei Rural Development Research Center，Jingzhou 434023，China

1 Introduction

In the period of strategic adjustment of economic development mode，national economy is changing from traditional＂high investment and high consumption＂economic growth to＂consumption driven＂endogenous growth mode，and the support of economic growth changes to growth of consumption demand of domestic residents.Now，a top priority is to accelerate establishing long-term mechanism for expanding consumption demand and tap consumption potential of residents，to promote economic growth.According to statistics，since the implementation of western development strategy in 2002，total output value of western ethnic minority areas annually increased 17.71%，higher than the national average level for 2.54%.However，the consumption growth rate of western ethnic minority areas was 14.12%，slower than the economic growth rate.As to per capita annual consumption expenditure of residents，the consumption level of national residents was 15632 yuan in 2013，the consumption level of urban residents was22880 yuan，and the consumption level of rural residents was7409 yuan.In western ethnic minority areas，consumption level of residents was 11958 yuan，consumption level of urban residents was 18628 yuan，and consumption level of rural residents was6309 yuan.In Tibet，the rural resident consumption level was as low as 3874 yuan，which was24.78%of the national average level of resident consumption and 52.28%of national average consumption level of rural residents.These indicate that there is a great gap in urban and rural consumption level，and the regional consumption level is extremely unbalanced.The consumption level of rural residents in western ethnic minority areas，especially western ethnic minority areas，is much lower than national average level.Rural resident consumption of western ethnic areas is inhibited for a long time.In recent years，the Party Central Committee clearly takes urbanization as strategic selection of expanding domestic demand.Urbanization is deemed as an essential engine for driving China's rural resident consumption.Therefore，it is of great theoretical value and practical value to effectively explore consumption demand of rural residents in western ethnic areas for promoting coordinated development of regional economy，improving people's livelihood，and stabilizing border regions in the context of energetically promoting urbanization.

2 Indicator selection，data description，and model setting

2.1 Indicator selectionWe made an empirical study on the relation between urbanization and growth of consumption of rural residents in western ethnic minority areas.We took consumption of rural residents（CRR）as explained variables.In this study，we used the per capita consumption expenditure of rural residents in China Statistical Yearbook to denote CRR.The main explanatory variable is urbanization level（UR），denoted by permanent resident population in urban areas／total population.

Since urbanization is favorable for raising income level of rural residents and strengthening the demonstration effect of consumption of urban residents on rural residents，urbanization will ultimately expand consumption demands of rural residents.Therefore，we added control variables such as income level of rural residents and consumption level of urban residents in our model.The income level of rural residents is measured using per capita net income of rural households，while consumption level of urban residents is denoted by per capita consumption expenditure of urban residents.

2.2 Data source and processingWe selected cross-section data of Gansu，Guangxi，Guizhou，Inner Mongolia，Ningxia，Qinghai， Shaanxi， Sichuan， Tibet， Xinjiang， Yunnan， and Chongqing in western ethnic areas from the statistical yearbook database in 2005－2013.Considering heterogeneity of provinces，we made deflation adjustment to per capita consumption expenditure of rural residents，per capita net income of rural residents，and per capita consumption expenditure of urban residents using rural resident consumer price index and urban resident consumer price index，and took the logarithm to eliminate potential hetero-variance resulted from original series.Then，we took natural logarithms of deflated consumption of rural residents（LCRR），urbanization rate（LUR），income of rural residents（LIRR），and consumption of urban residents（LCUR）.

2.3 M odel settingAccording to Keynesian's absolute income hypothesis and finding of Duesenberry（1948）in resident consumption，there are ratchet effects and demonstration effect.We built following models of influence factors of rural resident consumption：

where i is cross section and refers to12 provinces（cities）in western ethnic minority areas，t is time and refers to 2005－2013，μitdenotes random disturbance term of cross section in time t；α0is constant term，andβiis coefficient of independent variables.

3 Empirical analysis on urbanization driving consumption of rural residents in western ethnic minority areas

Estimation methods of panel data includes mixed regression model，individual fixed effect regression model，and individual random model.Considering individual difference in cross section，it is proper to select individual regression model and use F statistic test to judge.As for selecting fixed effect model or random effect model，when samples are randomly selected from total，it is proper to select random effect model；when regression analysis is limited to some certain individuals，it is proper to select fixed effect model and use Hausman test to make evaluation.Thus，it is proper to select individual fixed effect model.

Table 1 Results of empirical test in western ethnic minority areas（explained variable：LCRR）

According to empirical results of Model1，Model2 and Model 3 in Table 1，the probability of Hausman statistic is lower than 5%，indicating that test results rejects original hypothesis of random effect model and it is required to establish individual fixed effect model.In Model 1，the coefficient for one lag phase of per capita consumption of rural residents in western ethnic minority areas is0.7981，and it is significant at1%level，showing traditional consumption custom of rural residents in western areas has great influence on consumption of rural residents with contribution rate up to 79.81%.The coefficient of per capita income of rural residents in western ethnic minority areas is 0.2760 and it is significant at 5%level，indicating that the consumption level can increase 0.2760%significantly for every increase of1%for income of rural residents in western ethnic minority areas.The coefficient of per capita consumption of urban residents is 0.0898，but it is not significant，indicating that there is positive correlation between consumption expenditure of urban residents and that of rural residents，but the influence of such positive demonstration effect is not significant.

Empirical results indicate that improvement of consumption level of rural residents in western ethnic minority are as mainly depends on income level and their consumption habits，and there is high ratchet effect in consumption of rural residents.The fundamental reason lies in relatively low income of farmers in western ethnic minority areas，no well-established endowment security and medical care insurance，and imperfect rural financial market，lack of sense of safety，as well as excellent tradition of hard working and thrift.Besides，rural residents in western ethnic minority areas fail to receive information smoothly，and their consumption ideas are relatively backward.In addition to imperfect rural consumption channels and single consumption market，rural market circulation condition is poor，and consumption demand of rural market is repressed for a long time.

In Model 2，with factor of urbanization，from values，the marginal contribution of urbanization to consumption growth of rural residents in western ethnic minority areas is about0.3368 and it is significant at10%level.In other words，for every increase of 1%in urbanization rate，the consumption level of rural residents can increase 0.3368 percentage points，indicating that urbanization development has significant positive promotion to consumption growth of rural residents in western ethnic minority areas and has high pulling effect on consumption growth of rural residents.The regression coefficient of urban resident consumption for rural resident consumption rises from 0.0898 in Model 1 to 0.0975，and changes from insignificant influence in Model1 to significant influence.The regression coefficient of one lag phase of rural resident consumption to rural resident consumption drops from 0.7981 in Model1 to0.7802，and the regression coefficient of rural resident income to rural resident consumption significantly drops from 0.2760 in model 1 to 0.1635.

Empirical results indicate that with advance of urbanization，the restriction of consumption level of rural residents in western ethnic minority areas from income level and consumption habits will gradually decline，and the influence of demonstration effect of urban residents will significantly be strengthened.This is possibly because：

（i）in the process of urbanization，some rural residents flow to non-agricultural sectors，which will increase their wage income and increase agricultural productivity and accordingly increase rural residents' income；

（ii）in the process of urbanization，government in western ethnic minority areas will constantly improve infrastructure and public facilities， constantly expand rural marketing network，which is favorable for improving rural resident consumption environment and improve consumption level and convenience of rural residents；

（iii）in the process of urbanization，consumption ideas and modes of urban residents will gradually influence and change consumption habits of migrant workers and exert high demonstration effect.In addition，application of information network and e-commerce collects urban and rural markets seamlessly，enlarges consumption space of rural residents，and promotes upgrade of consumption structure of rural residents.Therefore，in the process of urbanization，increase of income level of rural residents in western ethnic minority areas removes uncertainty expectation of rural resident consumption，and strengthens demonstration effect of urban residents on rural residents，which is helpful for stimulating consumption enthusiasm of farmers and ultimately forms huge consumption and economic growth space.

LUR*LIRR coefficient in Model3 is0.0575 and it is significant at5%level.This further proves that urbanization development in western ethnic minority areas is helpful for increasing farmers' income and promoting improvement of per capita consumption level of rural residents.From comparison of Model2 and Model 3，the LIRR coefficient rises from 0.1635 in Model 2 to 0.2174，while the LCRRt-1 coefficient drops from 0.7802 in Model 2 to0.7567，fully indicating that urbanization in western ethnic minority areas mainly depends on increasing income of rural residents，accordingly strengthening independence of rural resident consumption，further optimizing consumption structure of rural residents，and finally promoting consumption growth of rural residents.

In sum，it is of strategic significance to take urbanization as essential engine for promoting rural resident consumption demand.Through promoting urbanization in western ethnic minority areas，it is able to significantly increase income of rural residents in western ethnic minority areas，promote optimization and upgrade of rural resident consumption structure，expand consumption space of rural residents，and effectively boosts increase of consumption of rural residents in western ethnic minority areas.Urbanization is a constant driver for economic development of western ethnic minority areas.

4 Conclusions and recommendations

4.1 ConclusionsOn the basis of panel data in 2005－2013，we studied the relationship between urbanization and rural resident consumption in western ethnic minority areas using individual fixed effect estimation method.We obtained following empirical results.

（i）Improvement of consumption level of rural residents in western ethnic minority are as mainly depends on income level and their consumption habits，and there is high ratchet effect in consumption of rural residents.

（ii）Urbanization greatly pulls consumption growth of rural residents in western ethnic minority areas.With advance of urbanization，the restriction of consumption level of rural residents in western ethnic minority areas from income level and consumption habits will gradually decline，and the influence of demonstration effect of urban residents will significantly be strengthened.

（iii）Urbanization in western ethnic minority areas mainly depends on increasing income of rural residents and ultimately promoting consumption growth of rural residents.

4.2 Recommendations

（i）Western ethnic minority areas should accelerate urbanization and expand income channels of farmers.It is recommended to establish and improve rural land circulation system，and guide more farmers tomake non-agricultural transfer，which is favorable for promoting large-scale operation of agricultural land and increasing financial income of farmers.Through accelerating urbanization and saving land at the same time，it is expected to promote large-scale operation and mechanization of agricultural production，and improve agricultural modernization and farmers' income level.

（ii）Western ethnic minority areas should improve rural resident consumption environment and raise rural resident consump-tion level.It is recommended to actively develop rural commerce and circulation services in western areas，regulate rural market order，and support diversified modern goods to flow to western rural market.For example，western ethnic minority areas should focus on develop traffic and communication，education and training，recreational service and medical care security services，cater to demand of upgrade of rural resident consumption structure，and raise consumption level of rural residents.

（iii）Western ethnic minority areas should bring into play radiation of counties and improve development quality of rural urbanization.Western ethnic minority areas are relatively scattered，and most are situated in county level towns.Relying on counties，it is expected to develop those small and medium sized towns with certain aggregation and demonstration effect，bring into play radiation of counties to rural areas，and effectively improve development quality of rural urbanization，which is favorable for reasonable in-situ flow of migrant workers in western ethnic minority areas.

（iv）Western ethnic minority areas should gradually improve urban and rural social security system and enhance consumption enthusiasm of rural residents.It is recommended to gradually establish urban and rural wide integrated social security system，make rural residents enjoy social security and basic public services such as compulsory education，labor employment，basic endowment，basic medical care and health，security housing，and municipal facilities，eliminate worry of western rural residents about consumption，and stimulate consumption enthusiasm of rural residents，so as to effectively promote consumption growth of rural residents.

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