Why Is the Growth of Economy and Welfare Different in China? A Theoretical and Empirical Study

Abstract

Based on the hypothesis of consumption utility and capital utility, the paper testifies the existence of the sole point of equilibrium between consumption and investment, and constructs a resident micro-utility function. It further derives a general gross national utility function combining the function with Lorenz curve, and exploits it to simulate national utility function in China with the statistical data. Furthermore it calculates the national welfare growth over the years, and analyses the differences and reasons between national welfare growth and GNP growth. The result indicates that the GNP growth has not brought about corresponding resident welfare growth. It can attribute to the uneven distribution of wealth, the decease of the ratio of consumption to GNP, and the inflation of prices, etc.