Study Of Fiscal Policy To Promote Employment

Employment is an important bridge between economic growth and human development. In modern market economy, the problems of employment are the tough issues that every country and economists have to face. As a developing country, China has the largest population and scarce resources in the world; the problem of employment is one of the hardest issues that puzzled the economic development and social harmony. The practice of economic development has shown that market mechanism could not solve the problem of unemployment; government should be responsible for enlarging the employment. The Regulation to promote the employment in People's Republic of China (draft) has indicated that Chinese government has put the employment as the top priority in social economic development. Fiscal policy as one of the major instruments in macroeconomic adjustment, it is significant to play the key role in promoting employment both in theory and practice.This thesis has based on the background of economic transferring stage in China, which is existing the unbalanced condition between labor supply and demand and the segmentation of labor market, the research intends to put forward the long effective policy ideas on the promotion of employment through the fiscal instruments such as, fiscal expenditure, taxation and social security and etc. the conclusion was under the Chinese special economic condition by focusing on the relationship between fiscal policy and labor supply, the relationship between fiscal policy and labor demand, as well as the relationship between fiscal policy and labor market.The thesis consists of seven chapters. Chapter one is the introduction, which analyzes the significance of reducing unemployment pressure both in theory and practice, summing up the related academic studies at home and abroad.In Chapter two we analyze the relationship between public finance and employment in theory. This chapter includes the basic theory of employment and unemployment, the meaning of full employment, and the determinant factors of employment, and the basic theories of fiscal policy on the impacts of employment. At last there are brief reviews on the employment theory of western academic schools.In Chapter three we analyze the relationship between fiscal policy and labor supply. Firstly we have analyzed briefly the characteristics and decisive factors of labor supply. Secondly, we focus on the academic analysis of the fiscal impact on the quantities and quality of labor supply. Thirdly we did some positive analysis of fiscal effects on labor supply and some comparisons of labor supply between US and European countries. Finally we further analyze the fiscal impact on Chinese labor supply under the current tax system through OLS approach.In Chapter four we analyze the relationship between fiscal policy and labor demand. Firstly we analyze briefly the characteristics and the decisive factors of labor demand from micro and macro point of view. Secondly, we analyze the fiscal impact on labor demand both from academic and practice through micro side. Then we did some positive reviews about the impact of the fuel tax on employment, which will be introduced in China, and further analyze the relationship between environmental taxation and employment.In Chapter five we analyze the fiscal policy and labor market. Firstly we analyze briefly the balanced and unbalanced of labor market and the determinant factors. Then we analyze the impact of fiscal policy on the labor market from partial and general equilibrium side, and some limitations of the effects. We explore the reasons of labor segmentation from fiscal policy side and put forward the policy arrangement on the unified labor market.In Chapter six we analyze the general effects of fiscal policy on employment. Firstly we analyzed the classification of fiscal policy and the major impact on employment. Then we analyzed the impact of government investment and transfer payment on employment. We then focused more on the different employment effects of tax relieves.In Chapter seven we put forward the fiscal policy choices to promote employment. First we briefly review the current employment situation, and predict the further labor supply and labor demand in China. Secondly, we put forward the macro policy trend to promote employment, clarified the orientation of government on active employment policy. Thirdly we did a general review on the existing fiscal policies relating to the promotion of employment. Finally we have put forward some fiscal policy choices concerning the promotion of employment based on the experiences from different countries, which include the general trend under the framework of sounded fiscal policy, the optimization of labor supply, the enlargement of labor demand, and the improvement of labor market.The thesis has discussed the relationship between fiscal policy and employment based on the current academic research from home and abroad, as well as the reality of the serious employment problems in China. We intend to create some new ideas in designing of the framework, the analysis approach and the content of the paper.In designing the framework, we tried to organize the paper from the related factors of employment, which mainly include labor supply, labor demand and labor market, and then focus on the special economic environment to study the relationship between fiscal policy and labor supply, the relationship between fiscal policy and labor demand, and the relationship between fiscal policy and labor market. After analyzing the different impacts of fiscal policy on the related factors, we put forward the policy choices to build the long effective mechanism of fiscal policy on the promotion of employment.In researching methods, we pay more attention to applying the following approaches: (1) to combine the normative analysis and positive analysis, quality analysis and quantity analysis,(2) to analyze from different point of view using different subjects,(3) to apply comparative analysis.In organizing the contents, we tried to analyze in more detail the impacts of fiscal policy on employment and put forward some creative ideas.In studying the relationship between fiscal policy and labor supply, we conclude that the income effect of taxation is larger than the substitution effect, because China is a developing country with lower income level, so the tax reform to cut the tax will have no effect on labor supply. However the quality of labor is more important in the further reform, so the government should pay more attention to optimize the labor supply and increase the quality of labor. In studying the relationship between fiscal policy and labor demand, we conclude that the changing of labor demand will not only determined by fiscal policy from micro side, but also determined by fiscal policy from macro side. The government should pay more attention to fiscal policies on the adjustment of the industrial structure, the different nature of enterprises, as well as the different organizational structure of enterprises to enlarge labor demand.In studying the relation between fiscal policy and labor market, we conclude that fiscal policy should be responsible for the market segmentation through providing public goods and services, tax system and social security system based on the dual economic system in China. So the government should pay more attention to reform the fiscal arrangement to build a unified labor market.Our general ideas on the promotion of employment through fiscal policy conclude that the government should build long effective mechanism to promote employment according to the requirement of public finance, and public investment should focus more on the infrastructure, the environmental improvement, the ecological protection, which can solve the problem of the shortage of public goods and take the advantage of cheap labor, and also create more job opportunities to build the solid foundation for employment in a long run.