Research On The Employment Effects Of Fiscal Policy

The report of the 19th National Congress of the Communist Party of China points out that employment is the largest livelihood,to adhere to the employment priority strategy and active employment policy,to achieve higher quality and fuller employment.At present,China is in a critical period of transforming the development mode,optimizing the economic structure and transforming the growth momentum,employment has become an important grasp to achieve the goals of the work,stable employment,is of great significance.In the short term,China is facing a complex and severe employment situation.With the increased downward pressure on the economy and the complex and changing external environment,the overall employment has been facing two major challenges,including continuing total pressure and structural contradictions.In the long term,employment is closely related to population strategy,industrial development,institutional reform and other major issues.In recent years,in response to the long-and short-term challenges of the employment situation,the central government has put the stabilization and expansion of employment at the top of its work priorities.Finance is the foundation and important pillar of national governance,always subordinate and serving national development goals and strategic needs.Meanwhile,as an important tool of macroeconomic regulation,fiscal policy plays an irreplaceable role in promoting employment of residents because of its ability to directly influence both supply and demand.Most existing literature focuses on macroeconomic effects(aggregate multiplier,investment,consumption,etc.),while there is a lack of literature that takes employment as the anchor point,which cannot satisfy the current fiscal practice needs.Based on the above background,this research focuses on the institutional mechanism to deal with short-term employment fluctuations,long-term employment structure and obstacles to labor mobility based on the domestic fiscal practice,studies the role and cost magnitude of fiscal policy to promote employment,and explores the fiscal system to promote the concentration of high human capital to innovative subjects and the future expenditure direction of fiscal policy to promote employment.In the normative research part,this research firstly compares the existing domestic and foreign literature from three aspects:fiscal policy and full employment,fiscal policy and high-quality employment,and fiscal policy and institutional barriers to employment,and summarizes the review to clarify the marginal contribution of this research.Then,based on history and reality,we sort out the history of employment work under the Party’s leadership and the role of finance in it,and analyze the new developments and features presented in the employment market in China at present and in the future,so as to identify the policy directions that finance should focus on in the field of employment.In the empirical study section,this research first investigates the employment promotion effect and cost of fiscal spending policy.Based on the background of the 2008 4 trillion investment plan,this research empirically examines the effect of fiscal spending on employment using macro data of prefecture-level cities and the instrumental variables method.The study finds that the "4 trillion" spending policy has significantly contributed to employment growth in each city.The heterogeneity analysis of 19 industries shows that the policy has significantly increased employment in manufacturing,construction,education,and health and social welfare industries,which is consistent with the policy’s tendency to invest in key areas and livelihood sectors.At the same time,the policy also has a significant impact on the sustainability of fiscal policy and the endogenous momentum of economic recovery.The fiscal cost of creating each nonfarm job based on the instrumental variables method and the backward projection method are RMB 104,000 and RMB 87,000,respectively.A comparative study of fiscal costs shows that the fiscal cost of the 4 trillion policy is lower than that of the ARRA in the United States during the same period,and there is still room for future job creation through spending policies.Then,this research investigates the employment promotion effect and cost of tax policy.Based on the exogenous shock of the change in China’s payroll pre-tax deduction policy in 2008,this research empirically tests the employment-promoting effect of tax policies using data of A-share listed companies from 2006 to 2012,combined with theoretical derivation and difference-in-difference models.It finds that,as a labor-oriented tax cut,the payroll pre-tax deduction reform significantly boosts the employment size of firms,and this result holds after multiple robustness tests.The results of the dynamic effects test show that there is a certain time lag in the reform effect,with smaller regression coefficients in the first year after the reform and more stable coefficients thereafter.In terms of the general equilibrium effect of the policy,the employment growth induced by the actual deduction reform does not have a crowding-out effect on firms’ investment,R&D and indebtedness.The results of the policy cost measurement show that the difference between the employment elasticity based on taxation and the cost measured by using the size of corporate employment on the elasticity of the effective corporate income tax rate is not significant,and the fiscal cost of creating one job is about 5,500 yuan,which is lower than that of developed countries and lower than that of capital-oriented tax cuts when compared with the results of studies in representative developed countries.The findings indicate that it is still economically feasible to promote employment through fiscal policy in China,and provide theoretical support for promoting a virtuous cycle of economic growth and employment increase through labor-oriented tax cuts.Further,this research explores the fiscal and tax system that promotes employment of high human capital groups.Based on the exogenous impact of the increase in the proportion of R&D expenses deducted from corporate income tax in 2018,using data of A-share listed companies from 2016 to 2019 and a difference-indifference model,this research investigates the upgrading effect of innovationoriented tax cuts on the employment structure of enterprises.It is found that,in general,the increase in the proportion of R&D expenses plus deduction significantly increases the proportion of graduate students in the employment structure of enterprises and promotes the accumulation of human capital.The results of heterogeneity analysis indicate that the policy effect is more pronounced for nonstate-owned enterprises and main board listed enterprises.The test of employment substitution effect finds that increasing the share of graduate students in the employment structure is not at the cost of crowding out the employment of people with other degrees.In terms of the impact of enterprise transformation and upgrading,the reform has a significant positive impact on all three aspects of enterprise R&D expenditure,productivity and profitability.The findings provide empirical evidence for promoting employment of a high human capital workforce through greater innovation-oriented tax cuts.Finally,this research focuses on the impact of public goods supply on labor mobility.Based on the exogenous impact of the nationwide "school abolition" policy since 2001,this research empirically examines the relationship between the supply of educational public goods and labor mobility by combining micro data from the 2005 national 1%population sample survey and data on the characteristics of 295 prefecture-level cities.It is found that the reduction in the supply of education public goods significantly impedes the free movement of labor,and the larger the reduction in supply,the more severe the impediment.The results of heterogeneity analysis show that this hindrance tends to be regardless of household type,but is more pronounced for labor force with boys in the family and smaller family size.The results of the study after introducing an intergenerational perspective show that the reduction in education public goods increases the probability of school-age children in mobile households to move out of their household registration,and that the supply of education public goods affects population migration in both generations.The above results imply that improving the efficiency of public resource allocation and optimizing the level of public goods supply,such as education,can help break down labor mobility barriers and reduce the duration of frictional unemployment existence,and should be an important direction for future fiscal spending.Based on the above analysis,this research puts forward the following policy recommendations.Comprehensive use of fiscal policy instruments to promote employment.The results of this research show that both fiscal expenditure and taxation policies can play an important role in stabilizing employment.In terms of the time effect,the expenditure policy has quicker effect after implementation,while the taxation policy has a certain time lag.In terms of the fiscal cost of job creation,both policies are economically feasible,costing lower than those in developed countries,with fiscal cost of tax policy being lower in comparison.At present,stabilizing employment and preserving employment have become the primary policy objectives to ensure stable economic operation and sustainable social development,and fiscal policy,as an important tool of macroeconomic regulation,can be used in combination with expenditure and tax policies when necessary to stabilize and promote employment scale and prevent large-scale unemployment.Focus on the employment of high human capital labor force and improve the fiscal and taxation system of science and technology innovation.In terms of the characteristics of employment subjects,the main body of new employment in the future is mainly the highly educated human capital labor force,and the solution of employment problem needs to focus on key groups.On the other hand,under the situation that the future development model gradually turns to rely on innovationdriven,the innovation-related fiscal tax system also becomes an important reform direction for fiscal policy.The results of this research show that the reform of increasing the proportion of R&D expenses plus deduction helps enterprises to upgrade their employment structure and employ more high human capital labor,and this increase mainly comes from the incremental effect,and there is no obvious employment substitution phenomenon.Fiscal taxes should play a key role in supporting the employment of key populations and technological progress.Tax support policies that are fairly geared toward market players,rather than distorting market behavior and creating new unfair competition as spending-type policies do,can be given higher expectations in the future fiscal policy system.Increase financial investment in the supply of public goods to narrow the differences between regions.Since the reform and opening up,labor mobility and employment problems have always gone hand in hand.In the current context that the number of labor force in China has entered the era of stock,promoting social mobility of labor force and talents and smoothing the employment institutional mechanism are of great significance to stimulate the vitality of micro subjects and improve the efficiency of labor allocation.This research shows that the reduction in the supply of public goods for education significantly hinders the free flow of labor and affects the migration of population in two generations.An important function of fiscal expenditure is the supply of public goods.Strengthening the fiscal investment in public goods matching labor mobility and narrowing the gap between urban and rural areas are important to smooth the mechanism of labor mobility,improve the efficiency of the employment market,enhance residents’ sense of access,happiness and security,and form a reasonable population layout.