This study examines the association between participation in China's rural homestead system reform and the structure of household consumption. We further analyze the underlying mechanisms and discuss the heterogeneous impacts of the homestead system reform.
Using survey data from 422 rural households across six counties in three pilot provinces (Zhejiang, Sichuan and Guizhou), this study employs propensity score matching (PSM) and Gelbach decomposition method to investigate the impact of the reform on consumption structure and its underlying mechanisms through the dual perspectives of consumption upgrading and consumption stratification.
Participation in the homestead system reform is linked to a significant shift in consumption structure, marked by a higher share of spending on developmental and recreational goods. However, this does not appear to constitute genuine consumption upgrading. By introducing rigid housing costs, the reform imposes liquidity constraints, such that although the lifestyle transition to modern apartments increases recreational consumption, it also crowds out subsistence and developmental consumption. Crucially, the reform's benefits are unequal. Its effectiveness differs by model, with the replacement model outperforming the transfer model by stimulating more recreational spending. Moreover, the positive association is progressively stronger for wealthier households, which widens the consumption gap and creates clear consumption stratification.
The study provides novel empirical evidence by introducing consumption upgrading and stratification perspectives to assess China's homestead system reform, moving beyond the traditional income-focused approach. It empirically identifies the structural substitution mechanism under financial constraints, offering evidence-based insights to inform ongoing policy debates on deepening homestead reforms and stimulating rural consumption.
