Research On Local Government Investment And Economic Dynamic Efficiency Under OLG Framework

As a kind of endogenous saving rate model, overlapping generations model originally developed by Allais(1947) who proposed it in Appendix of a textbook. It not only can be used to study the asset price bubbles, currency, social security, the change of the population structure and the problems of government’s debt, but also easy to expand to other areas’ research of related issues. Most scholars think, dynamic efficiency problem in the OLG model have a relationship with the excessive capital accumulation in a certain extent.In the numerous factors of influencing capital accumulation, investment is a fast and significant one,but in recent years, the regional government’s investment is related to regional financial system to a certain extent.As the main body of investment,government agencies invest too much on fundamental projects under the driving of fiscal policy, which lead to the over accumulated capital among regions to a certain extent, thereby affecting the dynamic efficiency of regional economy.After reviewing the existing literatures, in the second part of this paper defines the problems firstly and analysis the individual welfare problems and government’s balanced growth path in detail.Secondly, in the third part of this paper analyzes the economic’s dynamic efficiency and tease the dynamic efficiency problem in the basic diamond model. And then,comparing the analysis results and the results of the basic model.Considering the facor of government, in the light of theoretical analysis work out the assumptions.In the hypothesis testing, this paper makes an empirical research on the effect of local government investment on dynamic efficiency.From the angle of government investment,using the OLG model to test the dynamic efficiency of national and regional. On the basis of testing using the AMSZ to discuss the practical economic dynamic efficiency of national and regional.Through the cointegration test to estimate the long term relationship of government investment index and economic dynamic efficiency,combining with the VECM to explore the short-term adjustment process of these factors which can provide a reasonable explanation to judge the dynamic effective or ineffective of our economic operation. In addition, this paper also analyzes the effect of government investment and market segmentation on capital profit rate.In the end, this article carried out a summary of the full text and put forward relevant suggestions of policy on the basis of above analysis.