Chapters authored
An Influence of Relative Income on the Marginal Propensity to Consume: Evidence from Shanghai
This chapter deals with the question whether there is a relationship between the marginal propensity to consume and the status of the household in income distribution represented by a relative income. If so, then the current assumption of mainstream theory of consumption about the constant marginal propensity to consume could no longer be considered realistic and it will be necessary to take the element of relative income as a new key determinant of general consumption function. The aim of this work is to identify, describe, and prove an influence of relative income on the marginal propensity to consume using data for urban residents of Shanghai and to prove the correctness of Duesenberry’s relative income hypothesis. To achieve this goal, we use a panel regression, through which the results clearly confirm the validity of the initial hypothesis about the existence of functional dependence of the marginal propensity to consume on the relative income and so it fully supports the idea of interdependent concept of utility and consumption.
Part of the book: Proceedings of the 2nd Czech-China Scientific Conference 2016