Productive Government Expenditure And Economic Growth

As a part of public expenditure, the productive government expenditure has an important effect on guiding private capital investment, improving the level of labor supply and promoting long-run economic growth. A large number of labor supplies and transfer of rural surplus labor have been the basic reasons of economic growth in China for a long time. But after entering the 21st century when the problem of population aging increases, the cheap labor supply will not be unlimited any more in China. What's more, the development experience in the world has proven that the cheap labor supply is by no means a long-run determinant of economic growth. It is both a theoretical and very practical question to make use of productive government expenditure, improve level of human capital and promote labor supply under the background of steady fiscal policy so as to realize longer-run economic growth.According to the thinking that economic theory should keep close to reality, the paper firstly improves the theoretical model of old endogenous labor supply of the productive government expenditure and economic growth, and discusses productive government expenditure's influence on the level of labor supply and economic growth in the further analysis in order to identify the optimal size of production expenditure, tax rate and steady-state level of labor supply; Secondly, panel data of various areas and national time series data are respectively used for theoretical analysis to prove the relationship among the size of productive government expenditure, steady-state labor supply and economic growth from both structure and size, and also answer the supplementary questions of the influence that the structure of productive government expenditure and the ratio of productive government expenditure and government consumption expenditure have on economic growth. Finally, policy recommendations about the size and structure of productive government expenditure come into being according to research findings as well as our country's present economy reality.The research conclusions are: First, the increase of productive government expenditure cannot only boost economic growth but also promote steady-state level of labor supply. The size of productive government expenditure, optimal tax rate and steady-state level of labor supply can be determined at the same time under steady-state economic growth; Second, as the components of productive government expenditure, the capital construction expenditure, educational expenditure and scientific research expenditure play a positive effect on economic growth, but the significance level is related to time-lag; Third, the size of productive government expenditure has remarkable positive impact on economic growth and the level of labor supply, and the increase of the gross of productive government expenditure will benefit higher level of human capital, then increase labor supply and finally achieve the goal of boosting economic growth, but a higher ratio of productive government expenditure and government consumption expenditure is disadvantageous to economic growth. At last, there are some suggestions for government productive expenditure to maintain reasonable size and structure, avoid capital construction expenditure changing radically on condition of trying to keep the size steady-state, and play own due active role on economic growth by increasing the ratio of educational expenditure and scientific research expenditure.