Does household risk attitude affect consumption expenditure? Evidence from Chinese urban households

Abstract

This study investigates the impact of household risk attitude on consumption, a subject of enduring interest to academics and policymakers. Existing literature indicates that household consumption is influenced by financial and psychological factors, yet the role of household risk attitude remains underexplored. Utilizing panel data from the China Household Finance Survey, this research employs ordinary least squares regression to analyze the relationship between household risk attitude and consumption behavior. The results reveal that risk-averse households exhibit lower levels of consumption. Mechanisms including household entrepreneurship, social interactions, and consumption credit are identified as significant channels through which risk attitude affects consumption. The robustness of these findings is confirmed through instrumental variable analysis, with additional heterogeneity observed across regions, cities, and household leverage levels. These insights underscore the importance of incorporating household risk attitude into policy frameworks to stimulate consumption.