The Economic Effects Of Social Policy

Human capital and consumption are the key factors affecting economic growth. The mechanism of social policy affecting economic growth is mainly through public social expenditures and the quality of social policy system on human capital and consumption.The level of social welfare expenditure in social public expenditures affects the decisions made by individuals, families and enterprises on human capital investment. Consequently this affects the demand and formation of human capital as a production factor. The quality of the social policy system influences the demand and formation of human capital as well as the flows of human capital and the efficiency of resource allocation. In detail,the systematic principle of social policy impacts the composition and the demand market of human capital; the universal principle of the social policy impacts the efficiency of the stock of human capital increasing; the uniform principle of the social policy system affects the flows of human capital and the efficiency of resource allocation.Social policy affects consumption through the following two methods.On one hand, with the social welfare system and the regulation social public expenditure, social policy affects the social subject expectation of the current and future consumption. With the uncertainty of the consumption expenditure, social policy influences the decisions of consumption expenditure ultimately. On the other hand, the quality of the social policy system influences the consumption structure. A low quality of social policy enhances the crowding-out effect of the consumption in housing, health care, education and other fields. The fragmentation of the social policy, as well as social policies for the emergency, would lead to a large fluctuation of the income level and consumption structure, and finally affects the consumption decisions.The case study of Zhejiang Province demonstrates that the1997-2006social public expenditure to GDP ratio has a significant correlation with the GDP growth rate. Granger causality test shows that the social public expenditure to GDP ratio is the causality of granger of GDP growth rate. The empirical analysis states that the expenditure in the social policy is favorable to economic growth to a certain extent.