A Study Of Public Expenditure Transition And Its Effect On Economic Development

The effect of economic development of government public expenditures on the background of economic institutional transition is a fundamental issue in the field of public economy. More than 30 years of reform and opening up, Chinese economy has realized high growth and government's fiscal policy has played an important role, especially the policy of public expenditures adjustments in the development of the market economy. At present, China's rapid economic growth accompanied by an increasingly prominent issue of social equity, and the imbalance of economic development broke out. With the economic and social development, the demand for public services increased, while the degree of duty default of government public service aggravated in recent years. In this process, the background of economic institutional transition is one significant constraint condition. Combined with the background of the system transition, based on the perspective of government function changing from economic construction model to public service model, the article researched government public expenditures - the implementation cost of government economic functions, analyzed government public expenditures transition and it's impact on economic development adapting to the change of government function, which having a theoretical value and practical significance.Studies in the field of literature found that the researched context of correlative literature of public expenditures home and abroad mainly deals with the meaning and scope of public expenditures , the scale and the structure of public expenditures , the effect of public expenditures on economic growth, and the effect of public expenditures on social equity. Comprehensive analysis found that previous studies mainly have some limits: First, previous researches of government public expenditures adjustment more target promoting economic growth maximizing as a sole goal; Second, public expenditures were more classified as productive expenditure and unproductive expenditure, and their effects on economic growth or social equity lack synergy analysis; Third, the economic level usually focused on the analysis of economic gross; Fourth, previous analysis of public expenditures adjustment more neglected specific economic institution and economic system.In view of this, combined with the correlative theories of development economics, public economics and so on, this research constructed an unified analysis framework of public expenditures, united economic growth and social equity into an unified theoretical framework of economic development, analyzed public expenditures transition and its effect on economic development based on the perspective of transition of government functions.The study mainly includes the following areas:(1) From the theories of public goods and government functions, the research analyzed the relationship of government functions change and public expenditures transition. Economic transition made the government conduct objectives and constraints conditions fundamentally change. Public expenditures not only reflect the quantity of government's actions, but also embody government policy choices and implementation costs. The changes in the structure of public expenditures effectively measure the transition of government functions. In China, with economic system transition, government functions changed from the economic development model to public services model, public expenditures' structure should also transited from original model of economic development to public service model.(2) Studying the temporal and spatial characteristics of Chinese public expenditures scale and structure changes in public expenditures transition, making international comparison about the level of economic development and the scale or the structure of public expenditures of some developed market economic countries and developing countries, the article analyzed the problems that exist in the arrangements of public expenditures not meeting government functions transition. The study found: the structure of Chinese public expenditure had actually changed from economic development model to public service model; Since reform and opening up, public services products provided by Chinese government were still very shortage, and government public service functions had not been effectively enhanced.(3) Based on the theory inference of the relationship between the scale and structure adjustment of public expenditures in transition and the level of economic development, adopting Chinese 1980～2006 time series data and provincial cross-sectional data, using the newly developed vector autoregressive (VAR)methods and co-integration theory, the research empirically tested the long-term and short-term equilibrium relationships and their causal relationship between the scale and structure adjustment of public expenditures in transition and the level of economic development. The study found: Government budget economic constructive expenditures ratio in nominal GDP more significantly positive correlated with the level of economic development; Government budget public services expenditures ratio in nominal GDP significantly positive correlated the level of economic development, namely the current level of economic and social development in China still relatively low, public facilities and public services also inadequate compared with more developed market economy countries, education, health care, health and other public facilities and services played an negative role in economic development; Basic public services expenditures ratio in nominal GDP had positive correlation with the level of economic development; Government budget expenditures ratio in nominal GDP negatively correlated the level of economic development; In the long term, economic constructive expenditures and local financial expenditures were the granger causes of economic development, public services expenditure, basic public services expenditure and government budget expenditures were not granger causes of economic development. Basic public services expenditures and economic development had two-way causal relations. On the contrary, the level of economic development was the long-term reason of government's budget expenditures increasing. In addition, in order to better analyze the effect mechanisms of public expenditures transition, this paper, using OLS method, estimated the role of the gross and structure of public services expenditures to economic growth and social equity. The study found: The increasing of public services expenditures did not produce expected effects of economic growth and did not let people fairly sharing in goods of economic growth too; Normal public services expenditures negatively correlated economic growth and social equity; Basic public services expenditures significantly promoted economic growth and social equity.(4) Combining with Chinese practices, the research analyzed the effect factors of public expenditures transition from economic construction model to public service model. The study found: the scale of economic gross, institutional factors, income inequality, the population of financial support and the size of transfer payments are important effect factors of public expenditures transition, while the effect extent are not balanced.Finally, for the six-point policy proposals: (1) Government's public expenditure policy should shift from efficiency concept to equity growth concept with the core of redistribution; (2) Speed up public expenditures transition to further increase public service expenditures, especially basic public services expenditures proportion, have the establishment of public service system as the main task to promote government functions transition; (3) Implement basic public services equalization as soon as possible, playing its regulating role of social income equality; (4) Speed up the construction of public finance system and overcome seriously lower effectiveness and wastefulness of government expenditures; (5) Further improve the system of transfer payments; (6) Pay attention to adjust moderately the total of public expenditures to improve the degree of public expenditures transition.