The Impact of Pension Insurance on Consumption: Evidence from China

Investment, export and consumption have been the three core forces driving China’s economic growth. In the past decade, the role of national consumption in driving the economy has become more and more obvious. Expanding consumer demand and increasing the consumption of the population is a common concern of the Chinese Government and many scholars today. In thinking about the causes of under consumption, the relationship between the social security system and consumption demand should not be overlooked, especially pension insurance, which accounts for the largest share of social insurance. A decline in youth and a growth in the elderly population, coupled with a shortage of workers, would unavoidably result in lower spending, especially in China. Therefore, the data in this paper comes from the National Bureau of Data and Statistics (NBDS), which includes pension insurance data and per capita consumption levels in 31 provinces from 2017-2022. The investigation is mainly carried out through the dependent variable (pension insurance fund income). Applying the knowledge of econometrics, the ordinary least squares method is used to find that the purchase of pension insurance has a dampening effect on consumption. With the general environment of economic transformation and aging, there is a greater need to continuously improve the pension insurance system to ensure that residents have a secure old age while looking for the possibility of pension insurance to stimulate new consumption.