The Impact of Income Disparity on Food Consumption—Microdata from Rural China

Abstract

This paper examines the relationship between income inequality and consumption, utilizing panel data from rural China over a span of four years to validate the application of relative income theory in the domain of food consumption. Food consumption represents a significant portion of expenditures for the low-income demographic and is of vital importance to China’s food security and agricultural development. To ascertain the impact of income inequality on food consumption, this paper employs a bi-directional fixed-effects model, a mediation effect model, and machine learning causal analysis methods. Utilizing four years of rural resident survey data from the China Health and Nutrition Survey database, the study empirically tests the effect of income inequality on various types of food consumption, the channels through which it operates, and the heterogeneity among different income groups and educational backgrounds. The findings indicate that (1) income inequality within rural communities positively influences food consumption, and this conclusion remains robust under endogeneity treatment and robustness checks, positively affecting the transformation of food consumption and healthy intake; (2) income inequality among rural residents promotes food consumption through two mediating channels: the “demonstration effect” and the “ratchet effect;” (3) the impact of income inequality on food consumption exhibits heterogeneity among rural residents of different income levels and educational backgrounds.

Keywords

• income inequality
• demonstration effect
• ratchet effect
• food consumption
• food intake health index