Researching On The Mechanism And Effects Of Fiscal Policies On Residents' Consumption

For current macro-economy in China after the economic crisis, a lot of problems will be urgently solved. On the one hand, expanding domestic demand is more urgent than before because of sharp drop in foreign demand. The domestic excess capacity is accumulated as economic growth has long been over-reliance on high investment, which is resolved by residents'consumption demand in post-crisis era. Expansion of residents'consumption demand, especially the release of the enormous potential of the rural residents'consumption, is the strong backing of transformation of economic growth pattern and steady growth. On the other hand, domestic inflation pressure is sharply increasing. Facing the complexity of insufficient aggregate demand, overcapacity and the rapidly increasing price intertwining, Government needs what kind of fiscal policy. He should use inverse-cyclical or shun-cyclical fiscal policy, and whether the new active fiscal policy should exit or continue. These problem need to be extra careful.The insufficiency of residents' consumption in our country has tremendously complex reasons, which has a close relationship with "absence" or "offside" of government functions in the field of residents' consumption. At present, for theoretically using the fiscal policy to expand residents' consumption, there is the argument of Keynesian and neoclassical. According to neoclassical theory, that the government increases expenditures or reduces taxation does not necessarily increase residents' consumption like the Keynesian expectation. That is to say, there is the existence of battle about crowding-in or crowding-out effect of fiscal policy on residents' consumption. On the basis of the experience of the western developed countries, the implement of expansionary stimulus policy according to the traditional Keynesian is not always effective, which could sometimes produce deflationary effect on residents' consumption, and may cause unsustainable debt scale and large budget deficits. However, because of the long-term lack of theoretical analysis about the mechanism of fiscal policy on residents' consumption and the lack of overall evaluation of the effects about fiscal policy on residents' consumption in our country, thus the theory and practice always habitually think that we should execute expansionary policy according to the Keynesian, that is to say, we should increases expenditures or reduces taxation, or concurrently carry out.When the sub-prime crisis led the demand of foreign countries to take sharp drop, this paper has studied fiscal policy to expand residents' consumption from the principle and the actual effect of fiscal policies which is even more significant. The study has certain forward-looking and research value at the theoretical level. First, the paper provided a theoretical basis and decision-making ideas for the government according to operation situation of the economy. Secondly, the article rich the theoretical system of government's macro-regulation, and widen the government theoretical horizons. Thirdly, the essay is to perfect the fiscal theory and promote Fiscal discipline to develop. In addition, this paper has the important meaning to guide our fiscal policy practice. The study can not only be used in comprehensive evaluation and re-think of fiscal policy practice in China, but also provide practical basis for the future fiscal decision of government in post-crisis era. Then, the study can effectively solve the problem of our domestic demand shortage, and ensure fiscal policy robustness.During writing papers, this paper used economics as the main line, and conducted the inter-disciplinarity research by fusing public finance and consumption economics, sociology, psychology and so on in together. In order to adhere to objectivity of the actual observation and comprehensiveness of theory analysis, I have used a variety of research methods and means. Except the common research method, there are mainly the two methods to be used. The first is the combining with qualitative analysis and quantitative analysis. When the paper study the mechanism and effect of government spending, tax and income distribution on residents' consumption, I always adhered to the research paradigm combining with qualitative analysis and quantitative analysis. Firstly, the paper analyzed the mechanism of government expenditures, tax and income distribution on residents' consumption from the theoretical level. Secondly, the article established the corresponding mathematical model and used the latest test method to measure the effects about residents' consumption. Finally, according to whether empirical test results are consistent with or deviation from the theoretical analysis, the paper put forward countermeasures. The second is paying attention to the application of comparative analysis. On the other hand, when the paper studied the mechanism, the effects and policy design of government spending, taxation and income distribution on residents' consumption based on the special background of the dual social of urban-rural community, the comparison of urban and rural residents'consumption is throughout the text, then the article analyzed the reason for this discrepancy, and provided the basement for making decision and policy consideration so as to fiscal and taxation systems integration and harmonious between urban and rural areas.Besides the first chapter introduction, full-text structure is consisted of seven parts. The first part is "theoretical analysis of fiscal policy to promote residents' consumption". Firstly, on the one hand, this part theoreticaly explained the importance of residents' consumption to economic growth. On the other hand, this part theoreticaly analyzed the the connotation, form and mechanism of the residents'consumption of externalities. Then, the paper thought that government using fiscal policy to promote residents' consumption demand was not only beneficial to ensure sound and rapid economic development, but also could solve the problems of market failure in the field of residents' consumption. And therefore, on the one hand, this paper theoretically interpreted the relations between government investment expenditures, government spending, transfer expenditures, taxes and residents' consumption. On the other hand, the article used modified IS-LM model to discuss the transmission mechanism fiscal policy on residents' consumption demand.Although in IS-LM model analysis, the effects of fiscal policy on residents' consumption showed Keynes effect. However, this conclusion is based on many strict assumptions basis. For instance, price always remained unchanged in fiscal adjustment process. If these conditions cannot be met in reality, fiscal policy would be likely to produce no-Keynesian effect on residents' consumption. The paper analyzed the causes of the nonlinear effects of fiscal policy from the expected effect, wealth effect and substitution effect. This article used three kind definition of fiscal period to creatively differentiate the potential period of non-linear effect of fiscal policies in 30 provinces except Tibet during 1978-2008, then established the dynamic panel data model to test the effects of China's fiscal policy on residents'consumption by GMM estimates method. My researching has shown that fiscal policy produced significant non-Keynesian effects. The conclusion will provide a new evaluation criteria and the actual basis about the practice of fiscal policy.Although the paper's first and second part inspected the mechanism and effects of fiscal policy on residents'consumption from theoretical and empirical aspects, but they did not further explore the mechanism and effects of various expenditure, different categories of tax, income distribution on residents' consumption. Therefore, on the base of investigating the status, change trend and the causes of residents'consumption in the third part of the article, the paper examined the mechanism and the influence of government expenditures, tax and income distribution on residents' consumption in the fourth, fifth and sixth part in turn. This paper writing included income distribution, because income distribution had not only important influence on residents' consumption, but also income distribution function is one of basic function of modern public finance. Therefore, the government does not use income or spending policy to directly influence on residents' consumption, but also can indirectly affects residents'consumption through the role of fiscal policy on income distribution. Finally, in the seventh part of the paper, the article put forward relevant policy suggestions about fiscal policy to expand residents' consumption.The innovation of this paper lies in three aspects. First, the paper analyzed generation mechanism of the nonlinear effects of fiscal policy, then using three kind definition of fiscal period to creatively differentiate the potential period of non-linear effect of China's fiscal policies during 1978-2008, the article established the dynamic panel data model to test the effects of fiscal policy on nationwide, urban and rural residents'consumption by GMM estimates method. My researching has shown that fiscal revenue policies and spending policy produced significant non-Keynesian effects in different degrees. Secondly, the paper used tax economic effect principle to comprehensively analyze the mechanism of income tax, property tax and commodity tax on residents' consumption, and found that the mechanism of different tax categories had large differences, and tax did not always reduce residents' consumption. For example, imposing the property tax or deposit interest income tax will promote the consumption of the residents to increase due to the existence of substitution effect instead. Thirdly, the paper analyzed the mechanism of the first income distribution on residents' consumption from aggregate and structural levels, and empirically tested long-term equilibrium and short-term fluctuations of residents' consumption under the influence of the first income distribution through the co-integration and error correction model of panel data. My researching showed:the one is the long-term consumption elasticity of wage income and average marginal consumption propensity are higher than the profit income; the one is that short-term consumption elasticity of wage income and profit are very small, and the influence of improving the proportion of wage income on residents'consumption is not obvious in short-term.The deficiency of this paper mainly has three points. First, although the paper analyzed generating mechanism of nonlinear effect about fiscal policy on residents' consumption, but the article did not actually review whether no-Keynes effect of fiscal policy took place because of expectation effect, wealth effect or substitution effect. In addition, transformation boundary conditions and switch inflexion point identification between Keynesian effects with no-Keynesian effects about the influence of fiscal policy on residents' consumption had been not analyzed. Preliminary study of no-linear effect of fiscal policy in this paper only offered a new idea for the government formulating fiscal policy, and lacked stronger practical significance. These problems are also the future key research of this paper. Secondly, although the paper theoretically explained the mechanism of taxes on residents' consumption, but because the data is missing, the article failed to targeted investigation of effects about income tax, property tax and commodity tax on residents'consumption. The study can not provide a powerful actual basis for the government to formulate tax policy, and did not change traditional view and thinking formulary about "the relationship between tax and private consumption is always negative correlation". Thirdly, although this paper thought the optimal income gap of resident'income about expanding residents'consumption existed, and that the income level of urban and rural residents changed according to the local economic development degree, and exist each optimal income gap. Then, through distinguish the eastern, central and western areas, the paper empirically tested deviation from real income disparity to the optimal income gap, and proposed redistribution policy direction and key. However, it is relatively unfortunate that this paper did not give the estimated value of optimal income gap between urban resident and rural resident in the eastern, central and western areas. The article only thought the optimal income gap objectively existed, and dynamicly changed with the economic development.