Empirical Research On The Impact Of Urban And Rural Residents' Consumption Of Government Spending

As the globalization goes on, and the world's economic crisis spread like wildfire, China is facing plenty of fierce challenges and stresses from all aspects during international trade, in the procession of which, increasing the domestic demand has been well taken as one of the key strategies to stimulate the country's economy. However, the citizen's consumption plays a much weaker role than we expected in these decades. Under such circumstances, whether the government can promote the domestic demands through expending their expenditure, as the prior theories and experiences suggested, and then, whether the government expenditure is relative to the citizen's consumption, are all the questions we are due to think about, because these questions mean a lot not only to the theory application in China, but also to the performance review and future adjustment of those former polices.This paper overviewed related theoretical research about government expenditure and resident consumption, then analyzes the present situation of government expenditure and the consumption level about urban and rural residents.Finally,using the econometric model to examine the relationship between two variables though the 1978-2008 time series data, and then come to this conclusion:in the long term, the whole government expenditure have'to squeeze out'the effect for the resident consumption, and the effect for urban residents is more than rural. Consumption expenditure and investment expenditure have'to squeeze out'the effect for urban residents, but investment expenditure have 'to push in' the effect for the rural residents; in the short term, investment expenditure have'to squeeze out'the effect for the resident consumption, but consumption expenditure have different effect to urban and rural residents:pushing in the urban resident's consumption and squeezing out the rural's. This demonstrates that government expenditure can play a positive role to increase the consumption of residents in short term, but in the long run, the government expenditure and resident consumption is the substitution effect. On the bases of these analytic results, the government should adjust the structure of government expenditure, and improve Efficiency in the use of funds, while increasing the proportion of agricultural support expenditure.