An Empirical Study on the Causes of Internal Consumption Habits of Chinese Rural Residents

Abstract Based on the integration of the life cycle-persistent income consumption model, utility function, and internal habit theory, this paper constructs a multi-layer model including internal habit formation and empirically analyzes the causes of internal habit formation of rural residents in various consumption expenditures. The result shows: (1) The internal habit effect of consumption expenditure for survival (food, clothing, and residence) is generally small. In contrast, the internal habit eft of consumption expenditure for development enjoyment (medical care, education, household equipment, and transportation) is relatively large. (2) In terms of its impact on internal habit formation, inclusive digital finance has a positive moderating effect on food, clothing, medical care, and culture and education. The per capita years of education have a negative moderating effect on food, clothing, residence, medical care, and education. The dummy variables of developed area or not have a negative moderating effect on clothing, transportation, and education, however, have a positive moderating effect on home furnishings. (3) In terms of the intensity of adjustment to internal habits, digital financial inclusion is the largest, followed by the dummy variables of education level and developed area or not. From the perspective of the adjustment of internal habits, inclusive digital finance is a positively adjusted, while the level of education and regional economic differences show a negative adjustment trend.