How Much is the Consumption Potential of Citizenized Migrants? — Based on the Estimation of Migrants’ Income Elasticity of Demand in the New Era of China

Abstract

The economic development and urbanization in China have stepped into a new stage, and the style of migrants’ consumption has changed. We use nationally representative data from China Migrants Dynamic Survey (2010–2017) for the evaluation of migrants’ income elasticity of demand and data from Urban Household Survey for that of local citizens in the new era of China. The results show the following: (1) Migrants’ income elasticity of demand has reached 0.67 since the new era, presenting a sharply rising trend. In 2017, this number rose to 0.72, indicating that the overall consumption behavior of migrants tended to be localized. (2) Compared with the average consumption elasticity of local citizens (around 0.8), migrants’ income elasticity of demand was low, and still had room for improvement. (3) Citizenized migrants play a significant role in stimulating consumption. As estimated with consumption function, if citizenized migrants’ income elasticity of demand converges with that of local citizens, the total consumption will reach 15.8 trillion in 2030, equivalent to 9.3% of GDP of the year. The consumption growth directly driven by citizenized migrants is about 8 trillion yuan, equivalent to 4.7 percentage points of the GDP. Migrants are not only labor forces but also important consumers for urban areas. Therefore, to expand domestic demands and shift economic development paradigm, it is crucial to citizenize migrants as soon as possible by accelerating the construction of new-type urbanization and the reform of household registration system.