Economic Growth, Poverty Reduction And Fisical Policy:a D-CGE Model Of China

The Chinese government has been pursuing rapid economic growth for a long time. However, after the world financial crisis in2008, the Chinese economy slowed down because of the external shock of the global economic recession, which made the government facing new challenges in economic policy formulation to maintain reasonable and stable economic growth. Moreover, Chinese government seems to have underestimated the seriousness of poverty. According to international standards of the poverty line, China ranks second. Social inequality is worsening for the rapid development of economy, and the income gap between the regions has also reached a very high level. Therefore policy makers urgently need to make changes. Fiscal policy, which includes fiscal expenditure and tax revenue policy instruments, would be a good choice. The government can make full use of it to ensure the normal operation of macro-economy and adjust the economic structure.The thesis, funded by National Natural Science Fund Committee, studies on the Dynamic CGE modeling technology and its specific application, which includes two parts. First, this thesis studies on both the recursive dynamic CGE model of Keynes closure for China and SAM’s updating, balancing methods; second, it simulates two type of fiscal policy,4-trillion fiscal stimulus package between2009-2010and individual income tax reform, giving directional advises to Chinese fiscal policy choices during transition period.First, based on IO tables in2007, and combined with various statistical yearbooks and other relevant data, we establish the macro-SAM table in2007. And on this basis, we refine it to get the original19departments, three categories of labor, and12groups of residents’ microeconomic SAM. In addition, we elaborate the defects of the original SAM, and provides motivation for researches of updating data and balanced approach.Second, we launched an in-depth study on SAM processing technology. Knowing the asymmetry defects of existing update methods and restrictions of non-negative matrix elements, the thesis proposed new JSD approaches based on information theory with sign-preservation and tolerance extensions, provide a comprehensive set of framework of updating matrix, and prove the excellent properties of JSD approaches by empirical study. Similarly, we proposed extended SG-RAS approaches on the basis of the random CE and GRAS methods, and empirically tested the pros and cons of the method, which confirms its practical value. This paper then uses the SG-RAS method to finish the balancing work on original2007SAM. The research on data processing technology, as one of the most fundamental parts of the CGE analysis framework, fully ensures the quality of subsequent CGE model’s data, and provides necessary protections for the accuracy of simulation results.Third, we build the static and recursive dynamic CGE models which are suitable for Chinese fiscal policy analysis by two steps. The first step is to establish a Chinese static model of Keynesian structure based on IFPRI standardized model, and test the correctness of model constructure. The second step is to construct recursive CGE model, and implement all model codes by using the GAMS software, which provide a complete set of scalable analysis framework, prepare for subsequent analog applications of fiscal policies, and also provide a reference for similar studies, from defining structure, mathematical equations’system to the software achievement.Fourth, we made a simulation using two types of domestic fiscal policy-4trillion and tax reform, and got several conclusions of research analysis based on simulation results after establishing the model. The simulation analysis of the financial investment spending proves that,4trillion investment program from2009to2010can boost GDP by about1.2-1.4%each year. The economic growth effect was significant, which also produced a considerable amount of private consumption, and made the situation of absolute poverty and relative poverty worse. Divided by sectors, the three departments of the public administration and social organizations, education and water conservancy, environment and public facilities management industry, produced the higher efficiency of the government investment spending. However, real estate, mining and electricity produced the worst effects, especially in the real estate industry. The financial investment should pay attention to this critical factor in the future structural adjustment. Moreover, the analog analysis of tax reform found that an appropriate increase in the exemption amount can adjust relative well-beings of the residents, and ease the relative poverty. But if the exemption amount is too high, it would make the income inequality worse, which departs from the original intention of the reform. The combination of the tax rate and exemption amount is superior to increase the exemption amount alone, but it is regressive. But if we apply integrated income tax system reform, we can still reduce poverty significantly and alleviate inequality even in a tax loss of2.7%.Finally, the dissertation makes a conclusion on both theoretical research and empirical simulation of CGE modeling, points out the direction of the future development, clarifies the limitations and shortcomings of current researches, then provides suggestions for improvement of academic researches of CGE.