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| Collectivism and Household Consumption: New Empirical Evidence from China |
| TIAN Zifang
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| School of Economics, Central University of Finance and Economics |
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Abstract Understanding the determinants of household consumption is important for understanding the national economy. Scholars try to explain the dilemma of low consumption in certain countries or regions by studying cultural differences, but these studies are restricted by the limitations of data and technology, making the impact of culture on residents' consumption unclear. The mainstream view consists of theories of informal institutions, risk preferences and consumption concepts. These theories explain why culture affects individuals' consumption from different perspectives. As an important aspect of cultural characteristics, collectivism-individualism is an important object of cultural and economic research and worthy of further study.
The best known definition of collectivism is given by Hofstede (1980). He defines a collectivist society as one whose residents enter into a strong and closely connected inner group at birth that provides lifelong security for them. Additionally, the residents should be absolutely loyal to the group. Many scholars point out that this cultural characteristic is also applicable to the study of individuals. Gorodnichenko and Roland (2012) measure the index of collectivism in a culture at the individual level and provide strong support for the quantitative analysis of this paper. The collectivist culture of China is mainly reflected in blood relationships or circles of acquaintances. Stable social networks, social integration and emotional expression are reflected in the close relationships between the members of an inner group and self-control reflects the self-restraint prevalent in collectivist culture. These four dimensions form the core of collectivist culture in this paper. Using a large sample of individual survey data from the China Family Panel Studies (CFPS), we construct a comprehensive index of collectivism to analyze its impact on China's household consumption. The results confirm that the comprehensive collectivism concept has a significant and stable positive effect on consumption in China.
Social networks, social integration and emotional expression have significant positive effects on China's household consumption, but the sense of self-control has the opposite result. The influence of trust, an often used cultural variable, is not significant. Empirical analysis of different types of consumption shows that steady social networks significantly increase different types of consumption. Social integration significantly increases food, education, culture and entertainment consumption. Emotional expression significantly promotes clothing, housing, transportation, communication and other consumption. Self-control ability inhibits expenditures except on clothing and medical insurance. The comprehensive collectivism index has a significant positive effect on all types of consumption. When allowing for heterogeneity in the level of Internet penetration, we find that collectivism has a weaker effect on consumption in areas with greater Internet penetration. The results are still significant when using robust methods to address issues of endogeneity. These conclusions have an important policy implication. To improve the accuracy of policies, the government should pay attention to the effect of collectivism on consumption and the differences caused by regional differences in the informatization level.
This paper makes the following contributions. We measure the concept of collectivism from the perspective of the individual and explore its effect on consumption in China. This study both fills a gap in the literature and provides a new perspective for the interdisciplinary research of economics, sociology and psychology. It is worthwhile to pay attention to the steady positive effect of the family social network on different types of consumption, which proves that the core of collectivism in China is “family collectivism.”
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Received: 08 August 2019
Published: 10 June 2020
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