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The Unintended Consequences of Urban Community Infrastructure Investment for Consumption in China

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  • Congliang Wu

    (School of Economics and Management, Beihang University, Beijing 100010, China)

  • Ning Zhang

    (School of Economics and Management, Beihang University, Beijing 100010, China)

Abstract

Background: At a critical stage of the shift of economic growth, this work studied urban community infrastructure’s driving role in consumption, discusses the causes and action mechanisms of infrastructure in promoting residents’ consumption. Methods: Based on micro-household survey data, applying probit regression. Result: We found that community infrastructure, divided according to either its engineering or its service nature, has a great positive externality, significantly increasing the proportion of residents’ consumption, and that the driving force behind consumption in urban central areas, transportation, and environmental protection infrastructure is more obvious. Good urban community infrastructure facilitates residents’ production and promotes the efficient circulation of information, resources, and factors; improves residents’ subjective expectations; and brings more consumption opportunities so that community infrastructure significantly improves residents’ probability of consumption. Conclusion: In the context of economic transformation to a high-quality economy, we should pay attention to the key role of community infrastructure investment in structural transformation and choose urban central areas, capital-intensive industries, and transportation and environmental protection infrastructure as the investment focus so as to improve the consumption returns brought by infrastructure and achieve the transformation of the economy from an investment-driven one to an innovation-driven one.

Suggested Citation

  • Congliang Wu & Ning Zhang, 2022. "The Unintended Consequences of Urban Community Infrastructure Investment for Consumption in China," Sustainability, MDPI, vol. 14(6), pages 1-11, March.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:6:p:3661-:d:775719
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    References listed on IDEAS

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    1. Binkai Chen & Yang Yao, 2011. "The Cursed Virtue: Government Infrastructural Investment and Household Consumption in Chinese Provinces," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73, pages 856-877, December.
    2. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1097-1129, June.
    3. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    4. Horvath, Michal, 2009. "The effects of government spending shocks on consumption under optimal stabilization," European Economic Review, Elsevier, vol. 53(7), pages 815-829, October.
    5. Stephen J. Turnovsky & Wen Fang Liu, 2005. "Consumption and production externalities in a small open economy with accumulating capital," Chapters, in: Sisira Jayasuriya (ed.), Trade Theory, Analytical Models and Development, chapter 9, Edward Elgar Publishing.
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