Research On The Dynamic Effect Of Chinese Government Spending On Expending Consumption

Based on the theory of consumption and using methods as Stepwise Regression and State Space Model to analyze the dynamic effect of Chinese government Spending on the residents Consumption from1978to2009. The empirical analysis is composted by two part as the total relationship analysis and the difference analysis between the city residents and rural residents. In the end, I provide some policy recommendations with the summary of the result of the empirical analysis.Main research contents and achievements are as follows:1. Study on the dynamic effect of Chinese government spending on resident consumption, I analyze the factors which affect the resident consumption such as from government spending, resident income, resident consumption habit. The conclusion shows that in the short term Chinese government spending has a weak crowding-out effect on the consumption in one period and has a weak crowding-in effect on the consumption in other period, but in the long term Chinese government spending has a crowding-out effect on the consumption. The result of the analysis between Chinese government spending structure and the consumption shows that Chinese government spending on economy has a weak crowding-in effect on the consumption, Chinese government spending on education, society and medicine has a strong crowding-in effect on the consumption, Chinese government spending on government department management has a strong crowding-in effect on the consumption, Chinese government spending on National defense has no effect on the consumption.2. Study on the difference of the effect that Chinese government spending affects the city residents’consumption and the rural residents’consumption. I analyze the factors which affect the resident consumption such as from government spending, resident income, resident consumption habit. I compare the results of the empirical analysis and make a summary. The conclusion shows that in the long term, Chinese government spending has a crowed-out effect on the city resident consumption which has a crowed-in effect on the rural residents’ consumption. From1978to2009, the effect that Chinese government spending affects the city residents’consumption turns from a crowed-in effect to a crowed-out effect. The tendency of the rural resident consumption’s effect is opposite to the city residents’. The recommendation to the government is to adjust the structure of the Chinese government spending, to increase the government spending about the rural area, to increase the residents’ income.