Research On The Mechanism Of Productive Public Expenditure On Economic Growth And Efficiency

Since the 18th CPC National Congress,the economic growth of China is in a period of transition from "Factor-Driven" to "Efficiency-Driven".In the process,can goverment's productive expenditure improve TFP and boost the economy to achieve a high level of equilibrium?Based on the Theory of Endogenous Growth,this thesis divides productive public expenditures into public physical capital expenditures and public human capital expenditures.Then,by using Chinese provincial macro-panel data,we analyze the relationship between local government's productive public expenditures and economic efficiency and growth,and mainly discusse the threshold effect of the public material capital stock on the growth of total factor productivity(TFP)and the equilibrium of the economy under different returns to scale.With TFP as the proxy of economic efficiency,the thesis focuses on several issues:(1)Given the externality of human capital,what is the relationship between the growth of different types of productive public expenditures and economic growth?(2)Whether productive public expenditure has any effect on economic efficiency?if so,confirm this impact mechanism;(3)Under the conditions of productive public capital stock affecting economic efficiency,this thesis further explores the relationship between productive public expenditure and economic growth,and focuses on the study of changes in the relative size of public physical capital stock to induce abrupt changes in the efficiency coefficient so as to make the economic system facing multiple equilibrium.Thinking from phenomena to essence,this thesis first makes a realistic investigation and international comparison of the productive public expenditure of the Chinese government.First,a brief analysis is made from the variables of the type?proportion of the public expenditure.Based on the basic statistical description,we form a preliminary understanding of the comparison between local productive public expenditures and regional economic growth and efficiency;It can be seen that the actual GDP growth rate is higher but the TFP level is lower in provinces with higher proportion of public material capital expenditures;the real GDP growth rate is relatively low in provinces with low proportion of public physical capital expenditures,but it's TFP level is relatively high.The second is to compare the productive public expenditures of part BRICS countries,including China?India and South Africa,from the perspective of aggregate expenditure.The data show that China has the highest share of public material capital expenditures,obtaining the highest economic growth rate;South Africa has the highest share of public human capital expenditures,obtaining the highest TFP level.The next is a literature review,focusing on the theory of endogenous growth.It analyzes the domestic and foreign important documents on public expenditure,economic efficiency and growth,including the classification of government public expenditure,the relationships between accumulation of human capital?material capital,economic efficiency and growth,sorting out the relevant research on productive public expenditure and economic growth in China.Combining with the theoretical and empirical research on such issues both at home and abroad,the purpose and core contents of the thesis are summarized.Then,the article established a theoretical framework among each chapter,and then focuses on the systematic explaintion of the relationship between productive public expenditure and economic growth and efficiency in the endogenous growth theory.On the one hand,we intrduce the model of Guo Qingwang(2006),which discusses the influence of productive public expenditure on economic growth considering the externality of human capital;in the model,public material capital flows into the private sector production function,while public human capital investment enters the human capital accumulation function;the results show that the impact of the two types of public capital on economic growth depends on the elastic magnitude of the intertemporal substitution elasticity of consumers.For public human capital investment,if the elasticity is relatively large,it has a positive impact on growth;on the contrary,it has a negative impact;For public physical capital investment,it has a direct positive effect on economic growth and at the same time has an indirect effect on the accumulation of private human capital.Overall,the impact of public material capital on economic growth is positive when the intertemporal substitution elasticity of consumers is high.On the other hand,this chapter details the ways in which public expenditure affects economic efficiency.Corresponding empirical evidence shows that the public material capital per capita?private material capital per capita and public human capital per capita all have a significant positive impact on the output.It can be inferred that the elasticity of substitution in China is still relatively large,so there is still room for the public capital investment to improve output.In addition,the aggregate production function tends to exhibit the characteristics of constant returns to scale including public capital.Therefore,TFP is related to the ratio of public physical capital stock to private capital(MECP)and the ratio of public human capital investment to private capital.LnTFP is a piecewise function of InMECP with thresholds of-2.349 and-1.319,wich is significant at the 10%level.When InMECP is less than-2.349,the elasticity of MECP to TFP is 0.052;when InMECP is greater than-2.349 and less than-1.319,the elasticity of MECP to TFP is increased to 0.063;when InMECP is greater than-1.3191,the elasticity of MECP to TFP decreases rapidly to 0.031.In this chapter,we also find that the level of infrastructure construction measured by the highway mileage density is negatively correlated with TFP,which is a signal that China's highway infrastructure construction may have exceeded a reasonable economic critical level.Based on the characteristics of public material capital stocks in terms of returns to scale and congestion,this thesis considers the situation that economies of scale leads to the threshold effect of the relative stock of public material capital to the economic efficiency,and discusses the multiple equilibrium relationship between the stock of public material capital and the economic growth both theoretically and empirically.Theoretical analysis shows that depending on intensity of the scale of economic and other variables,the economic system may appear no equilibrium?single equilibrium or multiple equilibrium;If the economies of scale of public physical capital are strong enough,the economic system can produce three equilibriums,two of which are saddle-point steady states.Under such circumstances,a large shift of government expenditure share to public physical capital from the reduction of unproductive activities may reduce,in whole or in part,the region of uncertainty around the unstable equilibrium point on the balanced path,increasing the likelihood that economies will reach a high level of equilibrium.Empirical study of this part examines the threshold effect of the relative stock of public material capital to economic growth.Results show that there are two significant thresholds.The InMECP can be divided into three intervals of less than-2.833,-2.833 to-1.319 and greater than-1.319.The corresponding elasticities are 0.683,0.757,and 0.555,respectively.The last part is the summary of the full thesis,giving the policy implications and forecast of future research.Policy implications from this thesis can be summarized as follows:(1)Empirical evidence shows that the public material capital per capita?private material capital per capita and public human capital per capita all have a significant positive impact on the output.It can be inferred that the elasticity of substitution in China is still relatively large,and there is still room for the public capital investment to improve output.(2)TFP is positively related the ratio of public physical capital stock to private capital stock(MECP)and the ratio of public human capital investment to private capital stock.It shows the feasibility of using public capital to enhance economic efficiency.The elasticity of relative stock of public material capital to total factor productivity is a piecewise function.It is necessary to formulate the expenditure policy according to local conditions of each region.(3)There is a threshold effect between the relative stock of public material capital and economic growth.In the case of multiple equilibriums,if the externalities are strong enough,by adjustments of expenditure structure increasing public material capital investment,and there is a possibility that the economy can enter a high-level equilibrium path.