Precautionary motivation and consumption insurance: Empirical analysis of household consumption behavior in rural China

Abstract

Based on a household survey in rural China, this paper discusses parameters such as precautionary motive, excess sensitivity, consumption insurance,and inter-temporal substitution in the household consumption function in rural China. The conclusions of the paper indicate that there is a significant precautionary motive in household consumption in rural China, but the function of consumption insurance is very limited, and the consumption is also excessively sensitive to the income change. Such parameters are different among consumers within different groups.