Nonparametric Estimation Of Distributional Policy Effects In Government Investment

Since reform and opening, China's rapid economic development has made achievements that attracted worldwide attention, and as a guarantee of economic development, macroeconomic policies have played a significant role. In recent years, in the face of an increasingly diverse economy, the government's macro-control ability gradually increases. In the context of2008financial crisis whose impact on China's economy becomes increasingly obvious, our government make adjustments towards macro-control policy, and implement a proactive fiscal policy and moderately loose monetary policy. Moreover, a4trillion investment plan has put into to promote economic stability growth. Then how does such a large capital investment drive China's economic development to become a hot issue.In China, the investment has been the most direct and most effective means of stimulating economic growth. It is undoubted that the expansion of the government investment scale has the important effect on cities' economic growth. However, the effectiveness of the policy, especially to make stabilization of the economy development, has been controversial. Unlike the existing linear model, this paper develops the nonparametric policy effects model which is proposed by Christoph Rothe (2010), uses both the properties of positive and negative and monotonicity of the distribution function, and studies the economy policy effect from the expansion of government investment. In this paper, we choose the fixed asset investment, government investment in technology and government investment in education these three areas for analysis, empirical results show that:1. in short-term, fixed-asset investment plays an active role in urban economic development and among these three factors, the influence impact of investment in fixed assets to the economy is the biggest. When the investment in fixed assets increase of20%on the basis of the original, the city's economy has maintained steady growth, with the increase percentage in investment continues to expand, the role of investment to the development of the urban economy gradually shift to the expansion effect. To ensure healthy and stable development of the economy, the optimal scale of investment in fixed assets should be controlled between30%-40%.2. Increased investment in science and technology for economic development is not significant in short term, but if there is no government science and technology investment, there is significant impact to developed cities. As the effort of investment in science and technology policy under different policy effects is not clear, impact on the city's GDP has maintained a very limited range of policy effects. Therefore, we consider that government investment in science and technology's role in economic development is primarily a process of long-term economic returns, while the role of enhancing and improving the economic have not been well represented in the short term.3. Government investment in education is a neutral investment policies, on the one hand with increased investment, the GDP range whose number of cities reduce becomes smaller, and it presents a better stabilizing effect to urban economic development. Yet it maintains the expansion of economic development to a good trend, but it needs more input increases if we want to achieve in a short period.4. Together with these three investment factors,20%of the expansion of investment in economic development is effective. And when expanding the scale of investment, the role of investment in urban economic development evolves into fully expansion effect. And it brings more effect to sustainable economic development in long-term.