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| The Impact of Social Comparison and Relative Income on Migrant Workers’Consumption: Evidence from RUMiC Data |
| WANG Xianghong, CHEN Jian
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School of Economics,Renmin University of China;
School of Agricultural Economics,the Ohio state University |
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Abstract This paper intends to provide a new insight to understand why migrant workers in China have a low consumption rate. We focus on the effects of social comparison, or relative income, on household consumption rate. The survey data of Rural-to-Urban Migration in China from 2008 to 2009 was used to identify the relative comparisons among migrant workers, urban residents, and rural residents. We decompose relative deprivation index into relative income ranking and income inequality, and explore their impacts on household consumption jointly. On one hand, relative income ranking leads to conspicuous consumption motivation at present; on the other hand, this motivation is mitigated when relative income increases. Our results imply that households with lower relative income tend to consume more proportionally, while rise in inequality among migrant workers or urban residents can lower the current consumption rate of migrant workers, particularly for the poorer ones. Low relative income compared to urban residents will decrease current consumption, and this effect is especially strong for migrant households who intend to stay in the city in the long-run. Also, our result has significant policy implication that wage gap between urban and rural areas will curb the consumption in the long run.
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Received: 20 July 2016
Published: 01 January 1900
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