The Government's Financial Investment In Science And Technology Appropriate Scale Study

Technological progress is an important factor for a country to achieve economic growth and enhance international influence. Increasing scientific and technological input is effective in improving the level of a country's technological progress. Government and business are two of the main science and technology (S&T) investment. Government investment in S&T guids and promotes the input of the enterprises and the whole society, thereby promoting technological innovation and playing an important role in scientific and technological progress. As China's economy transforms from a planned economy to a market economy, the share of the government's S&T investment in the whole society is declining, which is even less than that in the mature market economies now. So, should the pubic investment in S&T be higher or lower in the market economy? Theorical research on the size and rationality of government's S&T investment was not expanded sufficiently. And it is also a major problem in practice. Furthermore, it is an urgent need to explore and solve such realistic problems in China. Therefore, research on optimizing the size of government science and technology inputs from the economic theory, methods and techniques of policy implementation and other aspects has important theoretical and practical significance.In this paper, the main object is on the size of Government's input in S&T. The optimization of the government's interfering level, boundaries and scope is investigated. Based on review of the relevant literatures on public S&T activities and optimization of public finance investment in S&T, with the methods of theoretical model deduction, econometric empirical research, analogy analysis, the paper conducts theoretical analysis and empirical testing on the relationship of the government's public S&T activities and economic Growth. Also the paper investgates the optimal size, target, achieving path and mechanism of China's public S&T input, and provides basis and references for China's S&T policy formulation and implementation.The main conclusions are the following. First, the government's public expenditure on R&D has the general public Barrow effect. With the government's provision of public knowledge for innovation gradually increasing, the economic growth rate is improved at the beginning. Meanwhile, public production of knowledge is at a cost of crowding out private resources. With the accumulation of this crowding, the incentives and resources for private innovation become less, leading to a decline in private sector innovation, then economic growth will eventually be in a downward trend. Therefore, there is an optimal public R&D size that maximizes economic growth. Second, the market conditions and other factors have different effects on the optimal size. Third, there is a long-term stable balanced relationship and significant two-way causality between China's pubic S&T investment and economic growth. Fourth, from the perspective of total factor productivity (TFP), both the government's public R&D and corporate R&D have a negative effect on China's TFP of R & D, in which the later is higher. So the S&T policy which encourages the increasing of business R&D efficiency should be implemented. Fifth, the level of China's government R&D is less than the optimal value; the share of the government R&D investment in public sector is less than the optimal value; the proportion of public R&D investment in basic research is less than the optimal level. So China should increase the proportion of government's funding for R&D, increase the support for basic research and other public R&D activities.The innovation of this paper is mainly reflected in the following. First, a government public R&D department which provides public knowledge for innovation activities at the cost of drawing resources from the economy is introduced in an endogenous economic growth model framework in which R&D and capital effect the economy growth jointly. The existence of optimal size of public R&D that maximizes the economic growth is proved, and the influencing factors as well as the mechanisms of the optimal size are tested with the methods of theoretical analysis and numerical simulation. The paper expands and enriches the literatures on the impact of the public R&D size on economic growth. Second, the efficiency of China's regional R&D is measured from the perspective of TFP. The performance of China's government R&D is evaluated based on the impact of two sectors'activities on the efficiency. It is a innovation and new try for the method and perspective of the research on this field. Third, the measuring of the optimal size and structure of China's public R&D investment based on approach of optimal allocation of resources is an extensive application of the optimal allocation of resources method. Fourth, referring to the evolutive rule and historical experience of the size of pubic S&T investment and its proportion relatively to other S&T investment at different stages of economic development in the main developed countries and emerging countries, associating with the China's economic development stage, international conditions and future development strategy, the paper measures the target of China's pubic S&T investment in the coming period and its achieving path and puts forward some specific and realistic policy advices for the realizing of the goal.