A structural model of consumption: An application to China during the global financial crisis

Citation data:

The Journal of Socio-Economics, ISSN: 1053-5357, Vol: 41, Issue: 3, Page: 284-288

Publication Year:
2012
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Repository URL:
https://works.bepress.com/jvoon/38, http://commons.ln.edu.hk/sw_master/1943
DOI:
10.1016/j.socec.2012.01.003
Author(s):
VOON, Jan Piaw, Thomas, VOON, Jan Cham
Publisher(s):
Elsevier BV
Tags:
Economics, Econometrics and Finance, China, Consumption, Emotion, Financial crisis, Psychological states, Structural behavioral model
article description
In this paper, we develop a structural model of consumption by incorporating psychological constructs which constitute important antecedents of household consumption and provide crucial structural linkages to the mental accounting evaluation of saving or consumption. Our model is tested using structural equation modeling (SEM). The model is applied to China for measuring consumption expenditure under uncertainty emanating from the 2008 global financial crisis. An empirical test using 9784 new Chinese household survey data show that our structural model is a significant improvement over the existing behavioral life cycle model, as it is able to capture the psychological states affecting different groups of consumers such as employed workers and unemployed retirees. Our new structural model of consumption fits the data very well. The results have important implications for public policy assessment. © 2012 Elsevier Inc.

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