Study On The Regional Effect Of Fiscal Policy

Under the current economic background, the unbalanced regional development is an outstanding problem during the process of China’s economic growth. In the meanwhile, China is faced with the pressures of both stimulating economic growth and narrowing the income gap. Thus, it is a serious challenge for governments at all levels that how to take the advantages of fiscal policy on structural adjustment so as to play an important role in promoting economic growth and improving income distribution.Based on the Chinese situation, it is a way to further deepen the regional effects of fiscal policy by investigating the different performances of fiscal policy affected on different regions, analyzing the influence means of fiscal policy impacted on the macro and micro economics in different regions as well as studying the mechanism of the regional effect brought by fiscal policy, which can provide a strong theoretical basis for the development of differentiated regional fiscal policy. In this article, the implementation effect of fiscal policy will be tested and the regional effects of fiscal policy will be analyzed by empirical data. Based on empirical findings, policy recommendations upon the problems such as promotion of economic growth and narrowing income distribution gap, optimization of regional industrial structure and enterprise investment structure as well as improving the level of consumption and social welfare will be proposed.In recent years, scholars of domestic begin to focus on the regional effects of fiscal policy. However, most domestic scholars study regional effects of fiscal spending or tax on economic growth, which neither includes the detailed analysis of regional effects of fiscal policy structure nor includes the analysis of discrepancy on regional economic development. In this paper we attempt to comprehensively analyze the implementation effect from the respects of economic growth, income distribution, business investment, industrial structure, consumption and social welfare based on the perspective of the regional economy. Besides, we depth study the inconsistencies of fiscal policy affected regional economic development.This paper includes seven chapters. Chapter one and chapter two are introduction and literature review respectively. Chapter three is theoretical analysis. According to the basic framework of fiscal policy theory, the models of total revenue- total expenditure, IS-LM are deeply studied, including the fiscal policy multipliers and its implementation mechanism. Through building a simple model of the two regions and extending to multi-regional model, we draw a theoretical conclusion that the multiplier effect of government’s economically purchase expenditure policy and transfer payments policy in underdeveloped regions is larger, the marginal effect of government spending and transfer payments in the underdeveloped regions is larger than that in developed regions, the marginal impact on investment of government spending and transfer payments in underdeveloped regions is larger than that in developed regions, which indicate that there exist features of distinct regional effects of fiscal policy.The section of empirical analysis includes chapter four, chapter five and chapter six, and its detailed contents are as follows. The effects of fiscal policy influenced on economic growth and regional income distribution are studied in chapter four. The effects of fiscal policy affected on regional investment and regional industrial structure are studied in chapter five. The effects of fiscal policy affected on regional consumption and society welfare are studied in chapter six. During the process of empirical study, the SVAR model is built. In the meanwhile, granger causality test, impulse response function and variance decomposition empirical methods are integrated used to analyze the regional characteristics and significant differences.Finally, chapter seven includes the main conclusion. Based on the theoretical and empirical analysis above, the policy recommendations on the idea and implementation of using fiscal policy are proposed. Firstly, according to the differences in regional economic development, the implementation fiscal policies should be differentiated. Secondly, based on the different effects of fiscal policy in different periods, grasping the chance of fiscal policy intervention, adjustment and exit reasonably. Thirdly, achieve the coordination through effective integrating and ensure the supports of fiscal policy. Fourthly, proposing the recommendations to promote regional economic growth and optimize income distribution. Fifthly, proposing the recommendations to promote enterprise investment and industrial restructure. Sixthly, enhance the level of consumption and social welfare.