Psychological Needs, Physiological Needs and Regional Comparison Effects

Abstract

This paper innovatively constructs a panel extended linear expenditure system (ELES) model including the theory of internal and external habit formation and analyzes the time effect of consumption habits and the regional differences of the comparison effects on rural residents in a variety of consumption expenditures from a temporal and spatial perspective. This research demonstrates the following. Firstly, overall, rural residents have least internal habits in terms of subsistence spending, followed by developmental spending and the most in enjoyment spending. Secondly, China’s rural residents consider the “actual use value” of commodities in “introverted” consumption expenditures; but in “export-oriented” consumption expenditures, besides the “actual use value” of the goods, they also seek to fulfill their “emotional demands”. Thirdly, there is the largest comparison effect on food and housing consumption expenditures for rural residents in coastal economic developed regions, and the smallest comparison effect on clothing, transportation, cultural and educational expenditures. It is the largest comparison effect on clothing and medical care expenditures for rural residents in underdeveloped regions of the central and western, and the smallest comparison effect on food and housing consumption expenditures.