The Impact of Diversified Income and Agricultural Tax Reform on the Consumption of Chinese Rural Residents

Abstract

Income from different sources has become an important guarantee to sustain family life and normal expenses in China. How different sources of income affect farmers’ expenditure levels and how they have influenced farmers’ consumption since the agricultural tax reform in China since the 20th century has become a question worth exploring. Panel data from 2016 to 2020 are utilized to examine rural residents’ consumption expenditures and their sources of disposable income by region to analyze the impact of different income sources on farmers’ consumption and the correlation between income before and after agricultural tax reform, and finally conducts an analysis of future scenarios based on a time series model. The research results show that the elasticity of income from different sources on rural households’ per capita consumption expenditure is different, among which wage income is the most elastic, while household business income has a relatively small effect on consumption expenditure, but through data analysis we can find that agricultural tax reform has a significant and continuous promotion effect on rural households’ per capita consumption expenditure. The continuous cycle of agricultural tax reform is long, and the transmission chain through less tax payment, expanded reproduction, harvest, realization, and then consumption is long, thus there is a certain lag in tax reduction effect. Income from such sources in the first three years has a large impact on the current period data, while the first four and five years have a relatively small impact on current business income.