Research On The Effectiveness Of Infrastructure Investment Policies Under Regional Differentiation

As China’s economy enters a "new normal" and hit by the COVID-19 pandemic,"stable growth" has become a major development need of the Chinese government.Infrastructure investment,as the main means for the government to boost the economy in the past,has once again become the key point of current policy.Existing literature believes that China’s infrastructure investment plays a limited role in promoting economic growth,and it is difficult to continue to bear the burden of macro-control policies.However,this paper argues that China’s infrastructure investment policy has been distorted to some extent recently,which has resulted in spatial misallocation of infrastructure investment and sacrifice of economic efficiency while unilaterally pursuing "uniform distribution" among regions.This paper argues that the spatial misallocation of infrastructure resources caused by resource distortion is one of the important reasons for the lower expected rate of return on infrastructure investment in China.As infrastructure investment has once again become an important policy to drive economic growth in the post-epidemic era,it is necessary to accurately identify the factors affecting the efficiency of infrastructure investment policies,and study and judge the role of infrastructure investment in China’s economic growth,so as to provide theoretical guidance for China’s macroeconomic development in the new era.In order to prove the existence of spatial mismatch of infrastructure investment,this paper finds through data sorting that the current regional development differentiation in China provides a realistic basis for the occurrence of spatial mismatch.Combined with the current background,this paper estimates the stock and ROI of per capita economic infrastructure and per capita social infrastructure of each province in China from 2004 to 2018,and confirms that there are two characteristics of the distribution of infrastructure investment in China: first,the direction of infrastructure investment is opposite to the direction of population flow;Second,the direction of infrastructure investment is contrary to the law of capital return.To be specific,the regional distribution of infrastructure in China is characterized by the spatial mismatch between per capita infrastructure construction and population flow in the opposite direction,that is,the per capita infrastructure stock in areas with continuous population inflow is lower than the average level of population outflow for a long time.By region,in the area of economic infrastructure,there is a big gap between the per capita stock level of population outflow and population inflow areas in transportation and information transmission.From the perspective of social infrastructure industry,in addition to the education and health industry,scientific research and technology service industry also have great regional differences.By further estimating the rate of return on infrastructure investment,it is found that the scale of government infrastructure investment in areas with a higher rate of return on infrastructure investment is lower,while that in areas with lower rate of return on investment is higher.To sum up,this paper proposes a hypothesis that the regional allocation of infrastructure investment in China is characterized by spatial mismatch,and the spatial mismatch of infrastructure investment is one of the reasons for the reduced policy effect of infrastructure investment in China.In view of the above assumptions,this paper uses provincial panel data from 2004 to 2018 to conduct empirical research and finds that: First of all,infrastructure investment deviating from the direction of population mobility inhibits the driving effect of infrastructure investment on economic growth in China,which indeed forms spatial mismatch.Secondly,the impact of infrastructure investment on economic growth presents an "inverted U shape",that is,the impact of economic and social infrastructure investment on economic growth rises first and then declines around 2012.The underlying reason lies in the cross-regional population flow caused by economic transformation after 2012,which leads to the spatial mismatch of infrastructure investment and gradually inhibits the driving effect of investment on the economy.Finally,spatial mismatch is one of the reasons for the regional heterogeneity of the rate of return on infrastructure investment in China,and the decrease of the contribution of infrastructure investment to regional economic development and macroeconomic growth in China.A large amount of infrastructure investment has not significantly increased the economic growth of population outflow areas,nor accelerated catch-up in less developed areas,nor maximized the efficiency of investment.Therefore,the future infrastructure investment needs to further optimize the investment direction and structure,organically combine the investment strategy with major regional development strategy,take the domestic major cycle as the main body,and pursue the balance between regional per capita level,which is the key to exert the growth effect of government infrastructure investment expenditure.In order to further evaluate the impact of the current spatial distribution characteristics of infrastructure investment on the policy effect of infrastructure investment,this paper introduces the dual externality of infrastructure investment into the multi-region and regional competition characteristics of DSGE model,and discusses the impact of spatial mismatch on the rate of return of infrastructure investment in China from the Angle of departure from the investment law.Research shows that although infrastructure investment policies in underdeveloped regions can promote local economic growth and narrow regional output gap,they cannot guarantee the narrow regional income gap as well.At the same time,due to the existence of intermediate trade channels,infrastructure investment in developed regions has a strong policy spillover effect compared with less developed regions.After calculating the multiplier of infrastructure investment,it is found that the central government’s emphasis on "fair" infrastructure investment in underdeveloped areas has formed a spatial mismatch,which is one of the reasons for the lower rate of return on infrastructure investment.The results of counterfactual analysis also prove that from the perspective of a national chess game,infrastructure investment follows people,and appropriately increasing infrastructure investment in areas with population inflow will not only not reduce the welfare effect of underdeveloped areas,but also greatly increase the overall rate of return of infrastructure investment in China.This is not a denial of "fairness",but a feasible way to balance "fairness" and "efficiency" and meet the needs of high-quality economic development.After exploring the economic impact of the spatial mismatch of infrastructure investment,this paper further discusses the causes of the spatial mismatch of infrastructure investment.There are three specific reasons as follows: First,the policy preference of the central government.The theory of "spatial political economy" proves that the Chinese government will artificially block the inclination of land and population resources to the developed regions through the "visible hand",thus forming the spatial mismatch of resources and leading to the decline of China’s economic growth.The second factor is the transfer payment system of the central government to local governments.As different transfer payment methods have different supporting effects on infrastructure construction,the spatial mismatch of infrastructure resources will be caused and the original intention of regional economic coordination strategy will be distorted.This paper establishes a multi-region dynamic general equilibrium model with different transfer payment mechanisms,and finds that compared with the special transfer payment of the central government to underdeveloped regions,the public investment supported by the general transfer payment has a stronger crowding effect on private consumption and investment,and is more conducive to improving regional output growth.If the proportion of special transfer payment is too large,the policy effect of transfer payment will be suppressed,but the spatial mismatch of infrastructure investment will be formed.The third is the heterogeneous policy selection factors of local governments facing the pressure of economic growth targets.Based on the provincial panel data from 2004 to 2018 and the development logic of local governments,it is found that the mismatch between population flow and per capita infrastructure investment stock level in developed regions lies in the different binding force of competition mechanism on local governments under the "promotion tournament" mechanism.Since China crossed the threshold of economic structure transformation in 2012,the differences between local industrial structure and market economic vitality have caused different policy demands of local governments in different regions when facing the pressure of economic growth.For example,under the constraints of economic growth targets,the demand for infrastructure investment to drive the economy in developed regions is lower than that in less developed regions.Finally,based on the research conclusions,this paper puts forward policy suggestions from four perspectives: easing the spatial mismatch of infrastructure investment,improving the policy support for underdeveloped regions,improving the transfer payment system and fiscal investment and financing policies,in an attempt to provide suggestions for China’s economic growth to achieve fast and stable.