Chapter 5 - Conclusion
5.2 Contributions & Limitations
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
63
And finally, since the variation of income, more specifically of the Lowest, Low, and Low-Middle Income Level has a positive relation with the APC, then policies of redistribution of wealth and increasing the minimal wage should be adopted in order to increase the Chinese consumption, and decrease income inequality. Even though the effectiveness of these policies showed huge gaps/failures after the 2008 crisis, after which the global inequality has just increased, progressive redistribution of wealth policies are still the most used tool of most of countries to attack the existing problems of inequality. Besides, a progressive increase of the minimum wage above the national wages adjustments might bring real benefits to the lower income levels of the population, as in the example of Brazil, and increase the consumption (Dabla-Norris, Kochhar, & Rick, 2015). But as seen, the adopted policies should avoid huge variations of Income Growth along the years, otherwise it would tend to impact negatively the Average Propensity to Consume.
5.2 Contributions & Limitations
As in every scientific study, this paper presents its main contributions for the state of the art, in which its limitations have to be observed before forward generalization or application of its main findings.
As the main contributions, this research could achieve all the three objectives proposed in the Table 2. For the first objective, this paper measured the impacts of Education, Health, Housing, Dependence and Income Growth over the APC of the Chinese Urban Households by Income Level and at the National Level.
Besides, it also showed through graphics, the evolution and behavior of each of those variables, as it is possible to see on the section 4.1.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
64
In addition, after the analysis in the section 4.3, the second objective could be also accomplished showing that the possible reasons of the main downturns of the National APC during the studied period was mainly due to (1) the increasing number of laid-off workers starting significantly from 1995; and, by (2) the real variation of income, which presented a big negative variation for the years in which the APC grew.
And finally, after comparing the results of this paper with previous literature on consumption, this research could throughout the whole paper, review and add to the state of art another perspective of Consumption Theory – in especial, its applicability in the Chinese case through the APC angle. In addition, it was observed that the APC is liable to variation according to some specific good and bad scenarios. Better explaining, the decrease of uncertainties, stable growth and increase of the size of the family (seen as a good) are responsible for the increase of the APC in a long run. In contrary, drastic decrease of ΔY16 or the power of purchase of the families, also lead to the increase of the APC, but in a short term due to the Duesenberry Effect – trend that afterward tend to decrease in a long run.
Through other perspective, unpredictability of future (such health-care spending of the families etc), huge income growth, increase of the PTI and decreasing size of the family are also responsible for the decrease of the APC. So, all these factors could lead to a higher (or lower) APC, but all the difference lies on the quality (the leading drivers) of how the APC varies.
Through another perspective, some limitations have to be observed.
Understanding that this research is mainly quantitative, it had to narrow down not
16 Or any intervening factor on this variable
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
65
just the used variables and time-frame, but also make some assumptions in order to make possible the proposed analysis.
Due to the data available and based on literature review, this study had to limit the scope of the research for the year of 1992-2012; and for only those five independent variables. It is certain that for the Chinese APC, it is not just driven by these variables, but according to most of the experts in the field, those five variables are the most significant ones.
Therefore, other variables such interest rate, demographic changes (such aging, migration etc), governmental spending on social security/benefits or even money liquidity17 might also be other intervening variables that due to the complexity, data availability and time constraint could not be used at the present work. Nevertheless, it would be important for future research a deeper research over the interaction of those variable with the APC.
In 2002, the National Bureau of Statistics changed its methodology, which could ultimately impact on the final results. Chamon & Prasad (2010) highlighted that in 2002, the “survey instrument was also refined to obtain more detailed responses to some questions”, which “suggests the spike in the data that year could merely represent a break in the methodology” (Barnett & Brooks, 2010).
Notwithstanding, most of the empirical studies, whether or not they considered the change of methodology, reached close results in their own works.
Besides the limitations already mentioned for the variables education and PTI, it is also necessary to point out that the spending of a household which has these two expenses, it is not just limited to what is considered/calculated in the used
17 As in Wen (2006)
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
66
indicators. To explain further, although the National Bureau of Statistics of China consider the given data as the average spending per capita on education of a family, it does not for example include the expenses of those families that decide to send their children to study abroad, as it has been increasingly happening.
Nine out of ten of the Chinese super-rich (with assets more that 100 million yuan) plan to send their children abroad, a number that is increasing drastically (IBT Staff Report, 2012). And this is not just for the rich families, but also for upper-middle classes, which spends in average 250 thousand dollars per year on overseas education for their children (Waldmeir, 2013). Other example of extra spending on education, which is not computed in the values of the used indicator for the variable E are the donations, many times forcedly induced, made by the families to the schools in order to guarantee their children’s enrollment (Wu X. , 2014).
For the variable PTI in turn, besides the limitations previously mentioned, the numbers don`t capture the burden share assumed by the previous generations in order to help the next one to purchase a new residence. As in many other societies, but specifically in China`s case, the older generation by tradition use savings to help their children to purchase their first home (Somasundaram, 2016). It thus represents a burden not just for those households that are going to purchase the real estate, but also for their parents – it has an indirect impact over other families, which is impossible to capture by the present quantitative analysis. Therefore, further studies are necessary in order to understand and measure the impact of this purchase assistance.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
67
And finally, although the variable Dependence wasn’t intended to measure just the unemployment rate, but the reader may confuse its relationship to the unemployment rate, since the variable D not necessarily capture the (un)employment situation in the Chinese market. This is because the variable D is not just dependable on the variation of the size of the family but also includes all those people that are dependent of its family member, despite whether they are looking or not for a job, which includes kids, elders and those laid-off employees listed as REC members. On the other hand, consider only the official unemployment rate means to underestimate the real number of displaced workers (Naughton, 2007).
So, despite of these considerations, the variable D were still used because it is believed to be the best indicator to capture the situation not just of the size of the family, but also to better understand the real situation of the dependence of a family over those indeed in a working status. Therefore, further studies are necessary to capture a more precise situation of this relationship and the real impact of unemployment over the Chinese APC.