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

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  • Voon, Jan P.
  • Voon, Jan Cham

Abstract

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.

Suggested Citation

  • Voon, Jan P. & Voon, Jan Cham, 2012. "A structural model of consumption: An application to China during the global financial crisis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(3), pages 284-288.
  • Handle: RePEc:eee:soceco:v:41:y:2012:i:3:p:284-288
    DOI: 10.1016/j.socec.2012.01.003
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    References listed on IDEAS

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    6. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    7. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    8. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
    9. Thaler, Richard H, 1994. "Psychology and Savings Policies," American Economic Review, American Economic Association, vol. 84(2), pages 186-192, May.
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    Cited by:

    1. E. Sardianou & I. Kostakis & R. Mitoula & V. Gkaragkani & E. Lalioti & E. Theodoropoulou, 2016. "Understanding the entrepreneurs’ behavioural intentions towards sustainable tourism: a case study from Greece," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 18(3), pages 857-879, June.
    2. Li, Fangyi & Song, Zhouying & Liu, Weidong, 2014. "China's energy consumption under the global economic crisis: Decomposition and sectoral analysis," Energy Policy, Elsevier, vol. 64(C), pages 193-202.

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