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| Does ‘Adding Leverage’ Stimulate Household Consumption?Evidence from Chinese Household Survey |
| PAN Min, LIU Zhiqi
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| Center for Economic Development Research/Economics and Management School, Wuhan University |
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Abstract Using China Family Panel Studies(CFPS) dataset, this paper examines the effects of household leverage on household consumptions, as well as the differences of the effects among different consumptions and between urban and rural households. We show that household leverage negatively correlates with spending. However, households with higher leverage tend to spend and consume more when their wealth changes. Household leverage has a significantly negative impact on the development and enjoyment of consumption while it exerts a positive influence on survival consumption which is more sensitive to wealth fluctuations. As far as the differences between urban and rural households, leverage dampers the spending of urban households and promotes consumption especially survival consumption of rural households which is more sensitive to wealth fluctuations as leverage increases. The results implicate that increasing household income and wealth, rather than ‘adding leverage’, is an efficacious method to stimulate consumption and to optimize consumption structure.
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Received: 07 July 2017
Published: 01 November 2018
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