The Fundamental Role of Consumption in Economic Development: Theory, Evaluation, and Policy

Abstract

Strengthening consumption’s fundamental role in economic development requires an adaptive transition of demand-side growth drivers from an investment-driven economy to a consumption-led economy. Against the backdrop of a relatively low consumption rate, expanding consumption promotes the formation of a consumption-led economic development model by facilitating economic circulation, stimulating economic growth, guiding resource allocation, and generating scale advantages. Building on a clarification of the scientific connotation of a consumption-led economy, this paper develops a consumption-led economic indicator system and constructs a consumption-led economic index to evaluate consumption’s fundamental role in economic development. The research results indicate that a consumption-led economy represents the primary direction of transformation in economic growth drivers: As economies evolve, consumption-led economic characteristics become increasingly pronounced, and a growing number of countries exhibit such characteristics. These characteristics are particularly evident in developed countries, most of which have already transitioned to a consumption-led economy. By contrast, newly industrialized countries and general industrialized countries display weaker consumption-led characteristics and predominantly follow either a domestic demand-led or an investment-driven economic development model. In light of China’s development practice, the country as a whole remains at the stage of a domestic demand-led economy. Given substantial regional disparities within the country, different regions should promote an adaptive transition of economic growth drivers toward a consumption-led economy in accordance with their specific economic conditions.

Keywords

economic growth driver / consumption-led economy / investment-driven economy / development stage / country type

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Higher Education Press