An analysis of Chinese urban residents' consumer demand employing a dynamic semi-parametric panel data model

Using data for China for the years 1991 to 2005 by province and employing the semi-parametric panel data model estimation method developed by Horowitz (2004) and Henderson et al. (2006) and Hubler's non-parametric generalized method of moments (GMM) estimation (2005), this article constructs a dynamic semi-parametric panel data model and describes the dynamic changing trajectory of the effect on consumption of income disparity among urban residents. Our findings show that there is a significant "ratchet effect" in the consumption of urban residents; that income disparity among urban residents has a clear negative influence on consumption; and that the trajectory of this influence shows a roughly bimodal curve.