An Empirical Study Of The Effect Of Public Spending On Economic Growth About The Western Of China

The public expenditure is an important instrument for the Government to regulatethe macro-economy. As our economic system is not perfect and the relevant system isnot yet mature, the problems such as market failures and information asymmetry existobjectively. So relying solely on the market is not able to achieve optimal allocation ofresources. Government, as the public sector, can effectively address market failures aswell as promote national economy developed sustained and healthy through its financialmeans to regulate the macro-economy.This paper bases on the literature and theory about government spending andeconomic growth. First, we analyze the total amount and structure of local governmentexpenditures in Western region. Then, we build an inter-provincial panel data model totest the impact of the total amount and structure of public expenditure on economicgrowth. Last, we discuss the strategies about government’s public spending forpromoting economic growth. We draw the following conclusions in the paper:First, there is a long-run equilibrium between the western region’s total publicspending and the economic growth. That is, there is a long-term effect of the total publicexpenditure on economic growth. The results show that the relationship between publicspending and economic growth in Guizhou, Shanxi, Qinghai, Ningxia is not significantand the rest except above the four are obvious positive effects, but there are obviousdifferences in the effect of provincial public spending on economic growth.Second, the long-term relationships in western region’s economic construction aswell as social culture and education spending with economic growth are not obvious butthe short-term impact is not. Economic development spending as well as social-culturespending has a role in promoting to economic growth in short term.Third, long-term relationship between administration spending and economicgrowth is not obvious but short-term impact is. In most provinces, administrativeexpenditure has a negative impact on economic growth, this is it hinder economicdevelopment.Four, There is a long-term equilibrium on defense spending as well as the otherspending on economic growth. Defense spending and the other expenditures have apositive impact on economic growth in most provinces but some are not. But in thisprovince, defense spending as well as the other spending have a relatively weak impact on hindering economic growth.