Abstract: In the context of the rising of trade protectionism, to study how to realize the upgrading of rural residents’ consumption in China is a good strategy to achieve high-quality economic development and meet people’s needs for a better life. In view of this, this paper introduces the uncertainty factors based on Friedman’s permanent income hypothesis so as to make the study more cutting-edge. At the same time, by making use of the relevant data provided by the National Bureau of Statistics, it finds out the panel model that best fits the consumption and income relationship of rural residents in China’s 31 provinces, autonomous regions and municipalities directly under the central government from 2000 to 2017, and innovatively adopts the ARIMA model to determine the lag period, so as to determine the permanent income and consumption inertia. This study finds and confirms that the one-way individual fixed-effect dynamic panel model including the one-phase lagging consumption without permanent income is reasonable for fitting the current consumption situation of the rural residents in China, it is relatively reasonable to add the uncertainty income item to the above model.

Key words: permanent income; rural household consumption; two-way fixed effect; dynamic panel; uncertainty