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FINANCIAL AVAILABILITY, INCOME GAP AND HOUSEHOLD CONSUMPTION RATE IN TRANSITIONAL CHINA: A THEORETICAL APPROACH AND EMPIRICAL TEST

NIANZHI GUO

Newhuadu Business School, Minjiang University, P. R. China

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HAI-TAO TSAO

https://orcid.org/0000-0002-0415-7289

School of Economics and Management, Minjiang University, P. R. China

E-mail Address: tsaoht@mju.edu.cn

Corresponding author.

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, and

DI ZHAO

School of Economics and Management, Xiamen University of Technology, P. R. China

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https://doi.org/10.1142/S0217590821500247Cited by:1 (Source: Crossref)

Abstract

Based on the characteristics of financial exclusion and income gap, this paper attempted to elucidate the fluctuation of China’s consumption rate through the mechanism of financial availability of low-income residents and its influence on household consumption in the reform era. The study showed that improving financial availability affects the consumption rate by increasing investment opportunities for low-income earners who can adjust the portfolio of composition. Meanwhile, this effect is affected by the income gap which plays a “threshold” role in the relationship between financial availability and consumption rate. Therefore, inclusive finance development must be adapted to economic development in order to prevent “too much finance”.

Keywords:

JEL: G11, G28, E21

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