Economic Policy Uncertainty and the Structure of Household Consumption:Evidence from Chinese Province Panel Data(2015-2023)

DOI: https://doi.org/10.62517/jse.202611211

Author(s)

Sifan Chen

Affiliation(s)

International Department, Global Education, Guangzhou, China

Abstract

This paper investigates the impact of Economic Policy Uncertainty (EPU) on the structure of household consumption in China. Using provincial panel data from 2015 to 2023 and a two-way fixed effects model, we analyze the heterogeneous effects of EPU on three consumption categories: food, education & culture, and healthcare. Results show that rising EPU significantly reduces the share of food expenditure while increasing the share of healthcare expenditure, with no statistically significant effect on education & culture spending. These findings, robust to alternative specifications, suggest that heightened policy uncertainty drives households to prioritize precautionary health spending over basic consumption upgrading. This study highlights the critical need for policy stability and a strengthened social safety net to mitigate uncertainty-driven distortions in household consumption patterns.

Keywords

Economic Policy Uncertainty (EPU); Consumption Structure; Panel Data; Precautionary Saving

References

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