The Influence Of Fiscal Expenditure For Agriculture On Rural Residents’ Consumption

Since the reform and opening up, China came into a comprehensive transition period of economy and society, people’s material and cultural life have been greatly improved. A profound financial crisis burst out in the whole world in2008, which made the economies of all countries face with a severe test. Only by stimulating domestic demand could China maintain high economic growth, and it’s also clear that two-thirds of Chinese are farmers whose consumptions have played an important part in promoting rapid economic growth.As a large population and agriculture province, the rural residents’consumption of Henan province deserve our attention. Fiscal policy is significant in adjusting the consumption structure and guiding the direction of consumption as an means of macroeconomic control. In this paper, based on the reviewing of relevant references home and abroad, the following research work is done:First, this paper analyzes the mechanism of how fiscal expenditure affects household consumption according to the consumption theory. Then, this paper uses the data of Engel’s coefficient, consumption of durable goods and propensity to consume to analyze the current situation of the consumption level and consumption structure of Henan province. In addition, analysis of fiscal expenditure of Henan province from expenditure level and structure is also done.Secondly, on the basis of analyzing current situation, this paper uses time series data from1978to2010of Henan province to reveal the relationship between consumption and financial support for agriculture by the ways of stationary test, cointegration test, Granger causality test and error correction model. The results indicate that seen from total amount of financial support, fiscal expenditure for agriculture of Henan province can pull the expenditure of rural residences’ consumption. Seen from the structure of financial support, support for agricultural production and agriculture operating expenses has obvious positive role in promoting rural residents’consumption. Financial rural infrastructure spending produces extrusion effect in rural residents’consumption. Rural relief and three charges of agricultural science and technology for rural residents’expenditure have positive role in promoting but not significant.Finally, based on the basic theory and empirical results, this paper analyzes the way to promote rural residents’consumption of Henan province from four kinds of mechanisms:income growth mechanism, social security mechanism, consumption leading mechanism and consumption environment optimization mechanism. These four mechanisms are indispensable. How to construct the four mechanisms in the same steps and develop their combined effects is a key and difficult problem for Henan province and even the whole nation.