Composition of Fiscal Expenditure and the Economic Growth and Volatility: Theory and Evidence
Read
DownLoad |
| Title | Composition of Fiscal Expenditure and the Economic Growth and Volatility: Theory and Evidence
|
| Author | Zhu Hong and Gong Liutang |
| Organization | Guanghua School of Management, Peking University |
| Email | zhuhong85@pku.edu.cn；ltgong@gsm.pku.edu.cn |
| Key Words | Composition of Fiscal Expenditure; Economic Growth; Volatility |
| Abstract | This paper analyzes the composition of government expenditure in the stochastic growth model to characterize how different types of fiscal expenses effect the economic growth and volatility theoretically. Furthermore, we test the empirical result of regional economy in China using provincial panel data from 1997 to 2005.It is found that, contrary to the fiscal expenditures on infrastructure and welfare, local agricultural and maintenance expenditures are positively associated with economic growth, whereas the adjustment of the volatility of infrastructure and agricultural expense is also an effective fiscal policy to stimulate output for local government. On the side of economic fluctuation, the expansion of expenditure on infrastructure and the reduction of agriculture are more effective on volatility smoothing. Besides, adjusting the maintenance and welfare spending is also good for ironing out the volatility of economy. |
| Serial Number | WP123 |
| Time | 2011-10-27 |
|